UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 20-F
(Mark One)
£☐REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
S☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2014
2016
OR
£☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
£☐SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF EVENT REQUIRING THIS SHELL COMPANY REPORT ……………….
FOR THE TRANSACTION PERIOD FORM ____________ TO __________
COMMISSION FILE NUMBER 1-15138
_______________________

___________________________
中国石油化工股份有限公司
CHINA PETROLEUM & CHEMICAL CORPORATION
(Exact name of Registrant as specified in its charter)
_______________________
____________________________
The People’s Republic of China
(Jurisdiction of incorporation or organization)
_______________________
____________________________
22 Chaoyangmen North Street
Chaoyang District, Beijing, 100728
The People’s Republic of China
(Address of principal executive offices)
_______________________
____________________________
Mr. Huang Wensheng
22 Chaoyangmen North Street
Chaoyang District, Beijing, 100728
The People’s Republic of China
Tel: +86 (10) 5996 0028
Fax: +86 (10) 5996 0386
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
________________________
1

Securities registered or to be registered pursuant to Section 12 (b) of the Act.

Title of Each Class 
Name of Each Exchange
On Which Registered
American Depositary Shares, each representing
100 H Shares of par value RMB 1.00 per share
 New York Stock Exchange, Inc.
H Shares of par value RMB 1.00 per share
 New York Stock Exchange, Inc.*
*   Not for trading, but only in connection with the registration of American Depository Shares.
 
*Not for trading, but only in connection with the registration of American Depository Shares.
Securities registered or to be registered pursuant to Section 12 (g) of the Act.
None
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15 (d) of the Act.
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

H Shares, par value RMB 1.00 per share
25,513,438,600
A Shares, par value RMB 1.00 per share
92,766,957,04095,557,771,046
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes X                     No__
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes __                     No X
Note - Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X                     No__
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)*
Yes__                     No__
*This requirement does not apply to the registrant in respect of this filing.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer X
Accelerated filer __Non-accelerated filer __

                                                                                                                                                                               Emerging growth company __

                If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.

                        †The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ___ 
International Financial Reporting Standards X
as issued by the International Accounting Standards Board
 Other ________

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17__                      Item 18__
2

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes __                     No X
2
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. *
Yes__                     No__
*This requirement does not apply to the registrant in respect of this filing.

3

Table of Contents
Page
ITEM 1.  Page
ITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS910
ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE910
ITEM 3.KEY INFORMATION910
 A.SELECTED FINANCIAL DATA910
 B.CAPITALIZATION AND INDEBTEDNESS11
 C.REASONS FOR THE OFFER AND USE OF PROCEEDS11
 D.RISK FACTORS11
ITEM 4.INFORMATION ON THE COMPANY1920
 A.HISTORY AND DEVELOPMENT OF THE COMPANY1920
 B.BUSINESS OVERVIEW21
 C.ORGANIZATIONAL STRUCTURE3738
 D.PROPERTY, PLANT AND EQUIPMENT3738
ITEM 4A.UNRESOLVED STAFF COMMENTS3839
ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS3839
 A.GENERAL3839
 B.CONSOLIDATED RESULTS OF OPERATIONS4142
 C.DISCUSSIONS ON RESULTS OF SEGMENT OPERATIONS47
 D.LIQUIDITY AND CAPITAL RESOURCES5455
ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES5758
 A.DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT5758
 B.COMPENSATION63
C.BOARD PRACTICE64
 D.C.BOARD PRACTICEEMPLOYEES65
 D.EMPLOYEES66
E.SHARE OWNERSHIP66
ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS66
A.MAJOR SHAREHOLDERS66
B.RELATED PARTY TRANSACTIONS67
 A.MAJOR SHAREHOLDERS67
B.RELATED PARTY TRANSACTIONS67
C.INTERESTS OF EXPERTS AND COUNSEL68
4

ITEM 8.FINANCIAL INFORMATION68
 A.CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION68
 B.SIGNIFICANT CHANGES6968
ITEM 9.THE OFFER AND LISTING69
 A.OFFER AND LISTING DETAILS69
ITEM 10.ADDITIONAL INFORMATION70
 A.SHARE CAPITAL70
 B.MEMORANDUM AND ARTICLES OF ASSOCIATION70
 C.MATERIAL CONTRACTS77
D.EXCHANGE CONTROLS77
E.TAXATION78
 D.EXCHANGE CONTROLS78
E.TAXATION78
F.DIVIDENDS AND PAYING AGENTS8382
 G.STATEMENT BY EXPERTS8382
 H.DOCUMENTS ON DISPLAY8382
 I.SUBSIDIARY INFORMATION8382
ITEM 11.QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK8382
ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES8786
ITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES8887
ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS8887
 A.MATERIAL MODIFICATIONS TO THE RIGHTS TO SECURITIES HOLDERS8887
 B.USE OF PROCEEDS8887
ITEM 15.CONTROLS AND PROCEDURES88
ITEM 16.RESERVED8988
ITEM 16A.16AAUDIT COMMITTEE FINANCIAL EXPERT8988
ITEM 16B.CODE OF ETHICS8988
ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES89
ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES9089
ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS9089
4
ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT9089
5

ITEM 16G.COMPARISON OF NEW YORK STOCK EXCHANGE CORPORATE GOVERNANCE RULES AND CHINA CORPORATE GOVERNANCE RULES FOR LISTED COMPANIES9089
ITEM 16H.MINE SAFETY DISCLOSURE9493
ITEM 17.FINANCIAL STATEMENTS9493
ITEM 18.FINANCIAL STATEMENTS9493
ITEM 19.EXHIBITS9493

56

CERTAIN TERMS AND CONVENTIONS
Definitions
Unless the context otherwise requires, references in this annual report to:
·“Sinopec Corp.”, “we”, “our” and “us” are to China Petroleum & Chemical Corporation, a PRC joint stock limited company, and its subsidiaries;
·“Sinopec Group Company” are to our controlling shareholder, China Petrochemical Corporation, a PRC limited liability company;
·“Sinopec Group” are to the Sinopec Group Company and its subsidiaries other than Sinopec Corp. and its subsidiaries;
·“provinces” are to provinces and to provincial-level autonomous regions and municipalities in China which are directly under the supervision of the central PRC government;
·“RMB” are to Renminbi, the currency of the PRC;
·“HK$” are to Hong Kong dollar, the currency of the Hong Kong Special Administrative Region of the PRC; and
·“US$” are to US dollars, the currency of the United States of America.
Conversion Conventions
Unless otherwise specified, conversionsconversion of crude oil from tonnes to barrels are made at a rate of one tonne to 7.35 barrels for crude oil we purchase from external sources, one tonne to 7.10 barrels for crude oil we produced domestically and one tonne to 7.22, 7.21 and 7.20 barrels for the years ended December 31, 2014, 2015 and 2016, respectively for crude oil we produced overseas, representing the American Petroleum Institute (“API”) gravity of the respective source of crude oil.overseas. Conversions of natural gas from cubic meters to cubic feet are made at a rate of one cubic meter to 35.31 cubic feet; and 6,000 cubic feet of natural gas is converted to one BOE.
Glossary of Technical Terms
Unless otherwise indicated in the context, references to:
·“BOE” are to barrels-of-oil equivalent.
·“primary distillation capacity” are to the crude oil throughput capacity of a refinery’s crude oil distillation units, calculated by estimating the number of days in a year that such crude oil distillation units are expected to operate, excluding downtime for regular maintenance, and multiplying that number by the amount equal to the units’ optimal daily crude oil throughput.
·“rated capacity” are to the output capacity of a given production unit or, where appropriate, the throughput capacity, calculated by estimating the number of days in a year that such production unit is expected to operate, excluding downtime for regular maintenance, and multiplying that number by an amount equal to the unit’s optimal daily output or throughput, as the case may be.

67

CURRENCIES AND EXCHANGE RATES
We publish our financial statements in Renminbi. Unless otherwise indicated, all translations from Renminbi to US dollars were made at the averages of mid-point exchange raterates of Renminbi as published by the PRC State Administration of Foreign Exchange (the “SAFE”).
(SAFE) for the past five years.
The following table sets forth the noon buying rate for US dollars in Renminbi for the periods indicated, as provided by the H.10 statistical release of the U.S. Federal Reserve Board. We do not represent that Renminbi or US dollar amounts could be converted into US dollars or Renminbi, as the case may be, at any particular rate, the rates below or at all. On April 3, 2015,17, 2017, the noon buying rate was RMB 6.19306.8835 to US$1.00.

  
Noon Buying Rate(1)
 
Period
 End  
Average(2)
  High  Low 
  (RMB per US$1.00) 
             
2010
  6.6000   6.7603   6.8330   6.6000 
2011  6.2939   6.4475   6.6364   6.2939 
2012
  6.2301   6.2990   6.3879   6.2221 
2013
  6.0537   6.1412   6.2438   6.0537 
2014
  6.2046   6.1620   6.2591   6.0402 
October 2014  6.1124   6.1251   6.1385   6.1107 
November 2014  6.1429   6.1249   6.1429   6.1117 
December 2014  6.2046   6.1886   6.2256   6.1490 
January 2015  6.2495   6.2181   6.2535   6.1870 
February 2015  6.2695   6.2518   6.2695   6.2399 
March 2015  6.1990   6.2386   6.2741   6.1955 
April 2015 (through April 3, 2015)  6.1930   6.1958   6.1976   6.1930 
  
Noon Buying Rate(1)
 
Period End  
Average(2)
  High  Low 
  (RMB per US$1.00) 
             
2012  6.2301   6.2990   6.3879   6.2221 
2013  6.0537   6.1412   6.2438   6.0537 
2014  6.2046   6.1704   6.2591   6.0402 
2015  6.4778   6.2869   6.4896   6.1870 
2016  6.9430   6.6549   6.9580   6.4480 
October 2016  6.7735   6.7303   6.7819   6.6685 
November 2016  6.8837   6.8402   6.9195   6.7534 
December 2016  6.9430   6.9198   6.9580   6.8771 
January 2017  6.8768   6.8907   6.9575   6.8360 
February 2017  6.8665   6.8694   6.8821   6.8517 
March 2017 6.8832  6.8940  6.9132  6.8687 
April 2017 (through April 17, 2017) 6.8835  6.8899  6.8988  6.8832 
__________
(1)The exchange rates reflect those set forth in the H.10 statistical release of the U.S. Federal Reserve Board.

(2)Annual averages are determined by averaging the rates on the last business day of each month during the relevant period. Monthly averages are calculated using the average of the daily rates during the relevant period.

78

FORWARD-LOOKING STATEMENTS
This annual report includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this annual report that address activities, events or developments which we expect or anticipate will or may occur in the future are hereby identified as forward-looking statements for the purpose of the safe harbor provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words such as believe, intend, expect, anticipate, project, estimate, predict, plan and similar expressions are also intended to identify forward-looking statements. These forward-looking statements address, among others, such issues as:
·amount and nature of future exploration and development,
·future prices of and demand for our products,
·future earnings and cash flow,
·development projects and drilling prospects,
·future plans and capital expenditures,
·estimates of proved oil and gas reserves,
·exploration prospects and reserves potential,
·expansion and other development trends of the petroleum and petrochemical industry,
·production forecasts of oil and gas,
·expected production or processing capacities, including expected rated capacities and primary distillation capacities, of units or facilities not yet in operation,
·expansion and growth of our business and operations, and
·our prospective operational and financial information.
These statements are based on assumptions and analyses made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in particular circumstances. However, whether actual results and developments will meet our expectations and predictions depends on a number of risks and uncertainties which could cause actual results to differ materially from our expectations, including the risks set forth in “Item 3. Key Information ¾ Risk Factors” and the following:
·fluctuations in crude oil and natural gas prices,
·fluctuations in prices of our refined oil and chemical products,
·failures or delays in achieving production from development projects,
·potential acquisitions and other business opportunities,
·general economic, market and business conditions, and
·other risks and factors beyond our control.
Consequently, all of the forward-looking statements made in this annual report are qualified by these cautionary statements and readers are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements should be considered in light of the various important factors set forth above and elsewhere in this Form 20-F. In addition, we cannot assure you that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected effect on us or our business or operations.
89

ITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
Not applicable.
ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3.KEY INFORMATION
A.A.          SELECTED FINANCIAL DATA
The selected consolidated statement of income data (except per ADS data) and consolidated cash flows data for the years ended December 31, 2012, 20132014, 2015 and 2014,2016, and the selected consolidated balance sheet data as of December 31, 20132015 and 20142016 are derived from, and should be read in conjunction with, the audited consolidated financial statements included elsewhere in this annual report. The selected consolidated statement of income data (except per ADS data) and consolidated cash flows data for the years ended December 31, 20102012 and 20112013 and the selected consolidated balance sheet data as of December 31, 2010, 20112012, 2013 and 20122014 are derived from our audited consolidated financial statements which are not included elsewhere in this annual report and the financial statements of the acquired businesses described below.
We acquired from Sinopec Group Company part of interest in Sonangol Sinopec International Limited (“SSI”) in 2010. As we and these companies are under the common control of Sinopec Group Company, our acquisitions are reflected in our consolidated financial statements as combination of entities under common control that is accounted for in a manner similar to a pooling-of-interests. Accordingly, the acquired assets and related liabilities have been accounted for at historical cost and our consolidated financial statements for periods prior to the combinations have been restated to include the financial condition and the results of operation of these companies on a combined basis.
On May 9, 2014, our shareholders approved at the annual general meeting the declaration and payment of a cash dividend of RMB 0.15 per share for 2013.
report.
Moreover, the selected financial data should be read in conjunction with our consolidated financial statements and “Item 5. Operating and Financial Review and Prospects” included elsewhere in this annual report. Our consolidated financial statements are prepared and presented in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board.
  Year Ended December 31, 
  2012  2013  2014  2015  2016 
  (RMB in millions, except per share, per ADS data and number of shares) 
Consolidated Statement of Income Data(1):
               
Operating revenues  2,787,684   2,881,928   2,827,566   2,020,375   1,930,911 
Operating expenses  (2,689,080)  (2,785,165)  (2,754,127)  (1,963,553)  (1,853,718)
Operating income  98,604   96,763   73,439   56,822   77,193 
Earnings before income tax  91,012   95,444   65,818   56,411   80,151 
Tax expense  (23,846)  (24,763)  (17,571)  (12,613)  (20,707)
Net income attributable to equity shareholders of the Company  64,082   66,348   46,639   32,512   46,672 
Basic earnings per share(2)
  0.568   0.571   0.399   0.269   0.385 
Basic earnings per ADS(2)
  56.78   57.14   39.92   26.90   38.55 
Diluted earnings per share(2)
  0.546   0.536   0.399   0.269   0.385 
Diluted earnings per ADS(2)
  54.63   53.59   39.89   26.90   38.55 
Cash dividends declared per share  0.231   0.240   0.200   0.150   0.249 
Segment Operating Income/(Loss)                    
Exploration and production  70,054   54,793   47,057   (17,418)  (36,641)
Refining  (11,444)  8,599   (1,954)  20,959   56,265 
Marketing and distribution  42,652   35,143   29,449   28,855   32,153 
Chemicals  1,120   846   (2,229)  19,476   20,623 
Corporate and others  (2,443)  (3,412)  (1,063)  384   3,212 
Elimination of inter-segment sales  (1,335)  794   2,179   4,566   1,581 
Operating income  98,604   96,763   73,439   56,822   77,193 
Shares                    
Basic weighted average number of A and H shares  112,853,724,741   116,102,910,373   116,822,487,451   120,852,547,200   121,071,209,646 
Diluted weighted average number of A and H shares  118,412,133,133   121,858,818,276   117,242,396,710   120,852,547,200   121,071,209,646 
                     


  As of December 31, 
  2012  2013  2014  2015  2016 
  (RMB in millions) 
Consolidated Balance Sheet Data(1):
               
Cash and cash equivalents  12,124   16,336   10,526   68,933   124,468 
Total current assets  366,961   374,578   361,559   333,657   412,261 
Total non-current assets  895,761   1,012,703   1,094,035   1,113,611   1,086,348 
Total assets  1,262,722   1,387,281   1,455,594   1,447,268   1,498,609 
Total current liabilities  (513,704)  (572,018)  (604,451)  (462,832)  (485,543)
 
910

  As of December 31, 
  2012  2013  2014  2015  2016 
  (RMB in millions) 
Short-term debts and loans from Sinopec Group Company and its affiliates (including current portion of long-term debts)  (115,982)  (163,870)  (178,148)  (115,446)  (74,819)
Long-term debts and loans from Sinopec Group Company and its affiliates (excluding current portion of long-term debts)  (162,116)  (145,590)  (150,932)  (139,746)  (117,446)
Total equity attributable to equity shareholders of the Company  (513,315)  (571,087)  (595,255)  (676,197)  (710,994)
Total equity  (552,401)  (625,778)  (649,603)  (788,161)  (831,235)


  Year Ended December 31 
  2012  2013  2014  2015  2016 
  (RMB in millions) 
Statement of Cash Flow and Other Financial Data(1):
               
Net cash generated from operating activities  142,622   151,470   148,019   165,740   214,543 
Net cash generated from/(used in) financing activities  5,272   31,146   (21,524)  9,093   (93,047)
Net cash used in investing activities  (161,792)  (178,322)  (132,321)  (116,719)  (66,217)
Capital expenditure                    
Exploration and production  79,071   105,311   80,196   54,710   32,187 
Refining  32,161   26,064   27,957   15,132   14,347 
Marketing and distribution  31,723   29,486   26,989   22,115   18,493 
Chemicals  23,692   19,263   15,944   17,634   8,849 
Corporate and others  2,397   5,076   3,648   2,821   2,580 
Total  169,044   185,200   154,734   112,412   76,456 
__________
  Year Ended December 31, 
  2010  2011  2012  2013  2014 
  (RMB in millions, except per share, per ADS data and number of shares) 
Consolidated Statement of Income Data(1):               
Operating revenues
  1,913,182   2,505,683   2,786,045   2,880,311   2,825,914 
Operating expenses
  (1,808,208)  (2,400,153)  (2,687,383)  (2,783,526)  (2,752,427)
Operating income
  104,974   105,530   98,662   96,785   73,487 
Earnings before income tax
  103,663   104,565   90,642   95,052   65,504 
Tax expense
  (25,681)  (26,120)  (23,846)  (24,763)  (17,571)
Net income attributable to equity shareholders of the Company  71,782   73,225   63,879   66,132   46,466 
Basic earnings per share(2) 
  0.637   0.650   0.566   0.570   0.398 
Basic earnings per ADS(2) 
  63.69   65.00   56.62   56.96   39.77 
Diluted earnings per share(2)
  0.631   0.625   0.545   0.534   0.397 
Diluted earnings per ADS(2)
  63.08   62.46   54.46   53.41   39.74 
Cash dividends declared per share  0.146   0.177   0.231   0.244   0.240 
Segment Results                    
Exploration and production
  47,149   71,631   70,054   54,793   47,057 
Refining
  15,851   (35,780)  (11,444)  8,599   (1,954)
Marketing and distribution
  30,760   44,696   42,652   35,143   29,449 
Chemicals
  15,011   26,732   1,178   868   (2,181)
Corporate and others
  (2,342)  (2,640)  (2,443)  (3,412)  (1,063)
Elimination of inter-segment sales  (1,455)  891   (1,335)  794   2,179 
Operating income
  104,974   105,530   98,662   96,785   73,487 
Shares                    
Basic weighted average number of A and H shares  112,713,267,514   112,713,299,453   112,853,724,741   116,102,910,373   116,822,487,451 
Diluted weighted average number of A and H shares  114,126,836,287   116,733,935,215   118,412,133,133   121,858,818,276   117,242,396,710 
  As of December 31, 
  2010  2011  2012  2013  2014 
  (RMB in millions) 
Consolidated Balance Sheet Data(1):
               
Cash and cash equivalents
  17,008   24,647   10,456   15,046   9,355 
Total current assets
  260,229   342,755   365,015   373,010   360,144 
Total non-current assets
  727,642   794,423   892,929   1,009,906   1,091,224 
Total assets
  987,871   1,137,178   1,257,944   1,382,916   1,451,368 
Total current liabilities  (336,406)  (444,240)  (513,373)  (571,822)  (604,257)
Short-term debts and loans from Sinopec Group Company and its affiliates (including current portion of long-term debts)  (35,828)  (80,373)  (115,982)  (163,870)  (178,148)
Long-term debts and loans from Sinopec Group Company and its affiliates (excluding current portion of long-term debts)  (174,075)  (154,457)  
(162,116
)  (145,590)  (150,932)
Total equity attributable to equity shareholders of the Company  (419,604)  (472,328)  (510,914)  (568,803)  (593,041)
Total equity  (451,036)  (507,344)  (548,036)  (621,626)  (645,577)
10
  Year Ended December 31 
  2010  2011  2012  2013  2014 
  (RMB in millions) 
Statement of Cash Flow and Other Financial Data(1):
               
Net cash generated from operating activities  170,333   150,622   142,380   151,893   148,347 
Net cash (used in)/generated from financing activities  (56,294)  (2,516)  5,628   31,519   (21, 421)
Net cash used in investing activities  (105,788)  (140,449)  (162,197)  (178,740)  (132,633)
Capital expenditure                    
Exploration and production  53,801   62,050   79,071   105,311   80,196 
Refining  20,015   25,767   32,161   26,064   27,957 
Marketing and distribution  30,829   30,387   31,723   29,486   26,989 
Chemicals  18,422   16,980   23,616   19,189   15,850 
Corporate and others  1,894   2,488   2,397   5,076   3,648 
Total  124,961   137,672   168,968   185,126   154,640 
__________
(1)The acquisition of 55% equity interest of Sonangol Sinopec International Limited (SSI)Shanghai Gaoqiao Petrochemical Co., Ltd. (“Gaoqiao”) in 20102016 from Sinopec Group Company were considered as “combination of entities under common control” and accounted in a manner similar to pooling-of-interests.of predecessor value accounting. Accordingly, the acquired assets and liabilities have been accounted for at historical cost and the consolidated financial statements for periods prior to the combinations have been restated to include the financial condition and results of operation of these acquired companiesbusiness on a combined basis. The considerations for these acquisitions were treated as equity transactions.financial condition and results of operation of Gaoqiao are presented in Note 1 to the consolidated financial statements.
(2)Basic earnings per share have been computed by dividing net income attributable to equity shareholders of our company by the weighted average number of shares in issue. Basic and diluted earnings per ADS have been computed as if all of our issued or potentialand authorized ordinary shares, including domestic shares and H shares, are represented by ADSs during each of the years presented. Each ADS represents 100 shares. The weighted average number of shares for the years prior to January 1, 2013 has been retrospectively adjusted as a result of the issuance of bonus shares and capitalizationre-capitalization in 2013, and accordingly, the basic earnings and diluted earnings per share have been adjusted retrospectively.

B.CAPITALIZATION AND INDEBTEDNESS
Not applicable.
C.REASONS FOR THE OFFER AND USE OF PROCEEDS
Not applicable.
D.RISK FACTORS
Risks Relating to Our Business Operation
We are exposed to risks associated with price fluctuations of crude oil and refined petroleumoil products and petrochemical products.
 
We consume a large amount of crude oil to produce our refined petroleumoil products and petrochemical products. Increases in crude oil prices may result in cost inflation, and high prices may also reduce demand for our products which might adversely affect our profitability. Decreases in prices of crude oil, refined oil products and refined product pricespetrochemical products may cause us to incur impairment to our investment and assets. A prolonged period of low oil price dropprices may impact our profit and ability to maintain our long-term investment projects. In addition, while we try to adjust the sale prices of our products to trackreflect international crude oil price fluctuations, our ability to pass on the increased cost resulting from crude oil price increases to our customers may be limited, and is dependent on international and domestic market conditions as well as the PRC government’s price control policies over refined petroleumoil products. For instance, the PRC government could exercise price control over refined petroleumoil products when international crude oil prices experience a sustained rise or
11

become significantly volatile. As a result, our results of operations and financial condition may be materially affected by the fluctuation of prices of crude oil, refined oil products and refined petroleum product prices.
petrochemical products.
Our continued business success depends in part on our ability to replace reserves and develop newly discovered reserves.
Our ability to achieve our growth objectives is dependent in part on our level of success in discovering or acquiring additional oil and natural gas reserves. Our exploration and development activities for additional reserves also expose us to inherent risks associated with drilling, including the risk that no proved oil or natural gas reservoirs might be discovered. Exploring for, developing and acquiring reserves is highly risky and capital intensive. The fluctuation in the prices of crude oil and natural gas will impact the baseamount of our proved oil or natural gas reserves. In the low oil price environment, only large scale, high quality reserves meet our development criteria. Some exploration projects are not viable at the current crude oil price level and cannot be carried forward, potentially leading to failure in supplementing our oil and natural gas reserves with additional reserves through future exploration. Without reserve additions through further exploration and development or acquisition activities, or if the prices of crude oil and natural gas fall sharply, our reserves and production will decline over time, which may materially and adversely affect our results of operations and financial condition.
11

We rely heavily on outside suppliers for crude oil and other raw materials, and we may even experience disruption of our ability to obtain crude oil and other raw materials.
We purchase a significant portion of crude oil and other feedstock from outside suppliers located in different countries and regions in the world. In 2014, approximately 82.5%world, of which an insignificant amount of the crude oil required forprocessed by our refinery business was sourced from international suppliers, and an insignificant amount is from countries or regions that are on the sanction list published and administered by the Office of Foreign Assets Control, or OFAC, of the US Department of Treasury, including Iran and Sudan. In addition, our developmentbusiness growth requires us to source an increasing amount of crude oil from outside suppliers. WeWhile we purposely source our crude oil from a diversified portfolio of outside suppliers to avoid any potential disruptions to our normal business operations, we are subject to the political, geographical and economic risks associated with these countries and areas. If our contractual relationships with one or more of our material supply contractsoutside suppliers were terminated or disrupted due to any natural disasters or political events, it is possible that we would not be able to find sufficient alternative sources of supply in a timely manner or on commercially reasonable terms. As a result, our business and financial condition would be materially and adversely affected.
Our business faces operation risks and natural disasters that may cause significant property damages, personal injuries and interruption of operations, and we may not have sufficient insurance coverage for all the financial losses incurred by us.
Exploring for, producing and transporting crude oil and natural gas and producing and transporting refined oil products and chemicalpetrochemical products involves a number of operating hazards. Our operations are subject to significant hazards and risks inherent in refining operations and in transporting and storing crude oil, intermediate products, and refined oil products and chemical products. These hazards and risks include, but are not limited to, natural disasters, fires, explosions, pipeline ruptures and spills, third-party interference and mechanical failure of equipment at our or third-party facilities, any of which could result in production and distribution difficulties and disruptions, environmental pollution, personal injury or wrongful death claims and other damage to our properties and the property of others. There is also risk of mechanical failure and equipment shutdowns both in general and following unforeseen events. In suchcertain situations, undamaged refinery processing units may be dependent on or interact with damaged process units and, accordingly, are also subject to being shut down. Even though we have a strong institutional focus on the safety of our operations and have implemented health, safety and environment (“HSE”)(HSE) management system within our company with the view to preventing accidents, and reducing personal injuries, property losses and environment pollution, our preventative measures may not be effective. We also maintain insurance coverage on our property, plant, equipment, inventory and inventory,potential third party liability, but our insurance coverage may not be sufficient to cover all the financial losses caused by the operation risks and natural disasters. Significant operating hazards and natural disasters may cause interruption to our operations, property or environmental damages as well as personal injuries, and each of these incidents could have a material adverse effect on our financial condition and results of operations.
The oil and natural gas reserves data in this annual report are only estimates, and our actual production, revenues and expenditures with respect to our reserves may differ materially from these estimates.
There are numerous uncertainties inherent in estimating quantities of proved oil and natural gas reserves, and in the timing of development expenditures and the projection of future rates of production. Adverse changes in economic conditions, such as a prolonged period of low oil prices, may render it uneconomical to develop certain reserves and lead to
12
downward revisions in our reserves. Our actual production, revenues, taxes and fees payable and development and operating expenditures with respect to our reserves may likely vary from these estimates.
The reliability of reserves estimates depends on:
·the quality and quantity of technical and economic data;
·the prevailing oil and gas prices applicable to our production;
·the production performance of the reservoirs; and
·extensive engineering judgments.
In addition, new drilling, testing and production results following the estimates may cause substantial upward or downward revisions in the estimates.
12

Oilfield exploration and drilling involves numerous risks, including risks that no commercially productive crude oil or natural gas reserves can be discovered and risks of failure to acquire or retain reserves.
Our oil and gas business is currently involved in exploration activities in various regions, including in some areas where natural conditions may be challenging and where the costs of such exploration activities may be high. As a result, our oil and gas business may incur cost overruns or may be required to curtail, delay or cancel drilling operations because of many factors, including, but not limited to, the following:
·unexpected drilling conditions;
·pressure or irregularities in geological formations;
·equipment failures or accidents;
·oil well blowouts;
·adverse weather conditions or natural disasters;
·compliance with existing or enhanced environmental regulations;
·governmental requirements and standards; or
·delays in the availability of drilling rigs and delivery and maintenance of equipment.
The future production of our oil and gas business depends significantly upon our success in finding or acquiring additional reserves and retaining and developing such reserves. If our oil and gas business fails to conduct successful exploration activities or to acquire or retain assets holding proved reserves, it may not meet its production or growth targets, and its proved reserves will decline as it extracts crude oil and natural gas from the existing reservoirs, which could adversely affect our business, financial condition and results of operations.
We have been actively pursuing business opportunities outside China to supplement our domestic resources. However, there can be no assurance that we can successfully locate sufficient alternative sources of crude oil supply or at all due to the complexity of the international political, economic and other conditions. If we fail to obtain sufficient alternative sources of crude oil supply, our results of operations and financial condition may be adversely affected.
Our exploration, development and production activities and our refining and petrochemical business require substantial expenditure and investments and our plans for and ability to make such expenditures and investments are subject to various risks.
Exploring, developing and producing crude oil and natural gas fields are capital-intensive activities involving a high degree of risk. Our ability to undertake exploration, development and production activities and make the necessary capital expenditures and investments is subject to many risks, contingencies and other uncertainties, which may prevent our oil and gas business from achieving the desired results, or which may significantly increase the expenditures and investments that our oil and gas business makes, including, but not limited to, the following:

13
·ability to generate sufficient cash flows from operations to finance its expenditures, investments and other requirements, which are affected by changes in crude oil and natural gas prices and sales volumes, and other factors;
·availability and terms of external financing;
·mix of exploration and development activities conducted on an independent basis and those conducted jointly with other partners;
·extent to which its ability to influence or adjust plans for exploration and development related expenditures is limited under joint operating agreements for those projects in which it has partners;
·government approvals required for exploration and development-related expenditures and investments in jurisdictions in which it conducts business; and
·economic, political and other conditions in jurisdictions in which it conducts business.
13

We intend to expand our exploration and production activities and, fromFrom time to time, we may construct new and/or revamp existing refining and petrochemical facilities, which require substantial capital expenditures and investments, thereinvestments. There can be no assurance that the cash generated by our operations will be sufficient to fund these development plans or that our actual future capital expenditures and investments will not significantly exceed our current planned amounts. Our inability to obtain sufficient funding for development plans could adversely affect our business, financial condition and results of operations.
Our development projects and production activities involve many uncertainties and operating risks that can prevent us from realizing profits and cause substantial losses.
Our development projects and production activities may be curtailed, delayed or cancelled for many reasons, including equipment shortages or failures, natural hazards, unexpected drilling conditions or reservoir characteristics, pressure or irregularities in geological formations, accidents, mechanical and technical difficulties and industrial action. These projects and activities, which include projects focused on non-conventional oil and gas exploration and development, will also often require the use of new and advanced technologies whichthat may be expensive to develop, purchase and implement, and may not function as expected. There is a risk that any development projects that we undertake may not yield adequate returns. In addition, our development projects and production activities, particularly those in remote areas, could become less profitable, or unprofitable, if we experience a prolonged period of low oil or gas prices or cost overruns.
Our business may be adversely affected by actions and regulations prompted by global climate changes.
As many nations in the international society has reachworld have reached consensus on the importance and urgency of addressing climate change, the oil and gas industry in which we operate is drawing increasing concerns about global climate change in recent years. A number of international, national and regional measures to limit greenhouse gas emissions have been enacted. The implementation of suchParis Agreement on climate change adopted by 195 nations in December 2015 has placed binding commitments on nations that have ratified it since November 2016, which may lead to more stringent national and regional measures in a number of countries and other potential legislation limiting emissions could affect the global demand for fossil fuels. If China or other countries in which we operate or desire to operate enact new laws that focus on limiting greenhouse gas emissions, itnear future. It could result in our substantial capital expenditure from compliance with these laws,measures, and our revenue generation and strategic growth opportunities could also be adversely impacted. In November 2014,addition, China and the United States made joint announcement against the threat of climate change, whereby China undertookhas undertaken to peak the CO2 emissions aroundby 2030 or earlier, if possible, and to increase the non-fossil fuel share of all energy to around 20 percent by 2030. Following the pledge, the National Development and Reform Commission of China (“NDRC”) adopted the Provisional Measures on the Management of Carbon Emission Trading on December 10, 2014, with the aim of fully implementing the whole China-wide greenhouse gashas also announced to implement a national emissions trading market from 2016.  As a result, a majorityscheme in 2017. We are expected to be recognized as an emission-control enterprise as are most of our subsidiaries operating in China may be subject to mandatory emissions trading and required to obtain emission quota,the Chinese enterprises, which could adversely affecthave adverse effect on our business, financial condition and results of operations.
Our overseas businesses may be adversely affected by changes of overseas government policies and business environment.
We have operations and assets and may seek new opportunities in various countries and regions, including countries in Africa, South America and Central Asia and certain other regions, some of which are deemed to be subject to a high degree of political risk. These countries have experienced and/or may experience in future political instability, changes to the regulatory environment, changes in taxation and foreign exchange controls, frequent disease outbreaks, and deterioration in social security.security and environmental risks. Any of these conditions occurring could disrupt or curtail our operations or development activities. These events may in turnalso cause our production to decline, limit our ability to pursue new opportunities, affect the recoverability of our assets or cause us to incur additional costs, particularly due to the long-term nature of many of our projects and the significant capital expenditure required.
14
We may be classified as a passive foreign investment company for United States federal income tax purposes, which could result in adverse United States federal income tax consequences to United States investors in the H shares or ADSs.
Depending upon the value of our assets, which may be determined based, in part, on the market price of our H shares or ADSs, and the nature of our assets and income over time, we could be classified as a passive foreign investment company, or PFIC, for United States federal income tax purposes. Based on our current income and assets and the market price of our H shares or ADSs, we do not expect to be classified asbelieve that we were a PFIC for the current taxable year ended December 31, 2016 and do not anticipate becoming a PFIC or in the foreseeable future. Because PFIC status is a factual determination made annually after the close of each taxable year on the basis of the composition of our income and the value of our active versus passive assets for that year, there can be no assurance that we will not be a PFIC for the current taxable year or any future taxable year. The overall level of our passive assets will be affected by how, and how quickly, we spend our liquid assets. Under circumstances where gross income from activities
14

that produce passive income significantly increase relative to our gross income from activities that produce non-passive income or where we determine not to deploy significant amounts of cash for active purposes, our risk of becoming classified as a PFIC may substantially increase. If we were to be or become classified as a PFIC, a US Holder (as defined in “Item 10. Additional Information – E. Taxation – United States Federal Income Tax Considerations”) may incur significantly increased United States income tax on gain recognized on the sale or other disposition of the H shares or ADSs and on the receipt of distributions on the H shares or ADSs to the extent such gain or distribution is treated as an “excess distribution” under the United States federal income tax rules. For more information see “Item 10. Additional Information – E. Taxation— United States Federal Income Tax Considerations—Passive Foreign Investment Company Rules.Considerations.”
Risks Relating to Our Industry
Our operations may be adversely affected by the global and domestic economic conditions.
Our results of operations are materially affected by economic conditions in China and elsewhere around the world. Although nations around the world have adopted various economic policies to mitigate the negative influences caused by factors such as the slowdown of world economic development, and the European financial crisis, it is uncertain how soon the world economy can be fully recovered. The Chinese economy has entered the “new normal” stage with more moderate economic growth. Our operations may also be adversely affected by factors such as someforeign countries’ trade protection policies which may affect the export and some regional trade agreements which may adversely affect the import.
our export and import activities.
Our operations may be adversely affected by the cyclical nature of the market.
Most of our revenues are attributable to sales of refined petroleumoil products and petrochemical products, and certain of these businesses and related products have historically been cyclical and sensitive to a number of factors that are beyond our control. These factors include the availability and prices of feedstock and general economic conditions, such as changes in industry capacity and output levels, cyclical changes in regional and global economic conditions, prices and availability of substitute products and changesfluctuation in consumer demand.prices and demands of natural gas, refined oil products and chemical products. Although we are an integrated company with upstream, midstream and downstream businesses, we have limited ability to mitigate the adverse influence of the cyclicality of global markets.
We face strong competition from domestic and foreign competitors.
Among our competitors, some are major integrated petroleum and petrochemical companies within and outside China, which have recently become more significant participants in the petroleum and petrochemical industry in China. On December 4, 2006, MinistryThe PRC government has gradually eased the restrictions on the right to use imported crude oil and relaxed control over the right to import refined oil products. This development may lead to refining overcapacity in China and intensify competition among local refineries. The relaxation of Commerceimport control may drive up cost of crude oil imports and reduce the PRC promulgatedprices of refined oil products, thus adversely impact our refining margin. The Chinese
15
crude oil and refined oil product markets are becoming increasingly dynamic and internationalized with implementation of tariff concessions and relaxation of market access as part of China's commitment for its accession to the “Administrative Rules for Crude Oil Market” and “Administrative Rules for Refined Petroleum Products Market”, which openWTO. In the wholesale market of cruderefined oil products previously dominated by PetroChina and refined petroleumus, we are facing stronger competition with new players and imported products entering the market. Our market share of chemical products is also under stronger competitive pressure due to the increasingly active participation of diversified new market entrants. As a result,players including multinational petroleum and petrochemical companies and domestic private enterprises. In addition, we face more competition in both crude oil and refined petroleum product markets. We also expect to face competition in both domestic and international petrochemical product market as a result of our domestic and international competitors’ increasing production capacity. Increased competition may have a material adverse effect on our financial condition and results of operations.
 
Risks Relating to Our Controlling Shareholder
We engage in related party transactions with Sinopec Group from time to time which may create potential conflict of interest.
interest.
We have engaged from time to time and will continue to engage in a variety of transactions with Sinopec Group, which provides us with a number of services, including, but not limited to, ancillary supply, engineering, maintenance, transport, lease of land use right, lease of buildings, as well as educational and community services. The nature of our transactions with Sinopec Group is governed by a number of service and other contracts between Sinopec Group and us. We have established various schemes in those agreements so that these transactions, when entered into, are under terms that are at arm’s length. However, we cannot assure you that Sinopec Group Company or any of its members would not take actions that may favor its interests or its other subsidiaries’ interests over ours.
We are controlled by Sinopec Group Company, our ultimate controlling shareholder, whose interest in certain businesses compete or are likely to compete with our business.
business.
Sinopec Group Company has interests in certain businesses, such as oil refining, petrochemical producing and overseas exploration and development, which compete or are likely to compete, either directly or indirectly, with our businesses. To avoid the adverse effects brought by the competition between us and Sinopec Group Company to the
15

maximum extent possible, we and Sinopec Group Company have entered into a non-competition agreement. In 2012, we received from Sinopec Group Company an undertaking to avoid its competition with us. For details, please refer to the descriptions under “Item 7. Major Shareholders and Related Party Transactions – A. Major Shareholders”. Notwithstanding the foregoing contractual arrangements, because Sinopec Group Company is our controlling shareholder, Sinopec Group Company may take actions that may conflict with our own interests.
It is possible that the current or future activities of our ultimate controlling shareholder, Sinopec Group Company, or its affiliates in or with certain countries that are the subject of economic sanctions under relevant U.S. laws could result in negative media and investor attention to us and possible imposition of sanctions on Sinopec Group Company, or its affiliates, which could materially and adversely affect our shareholders or our company.
shareholders' value and operations.
Sinopec Group Company undertakes, from time to time and without our involvement, overseas investments and operations in the oil and gas industry, including exploration and production of oil and gas, refining and Liquefied Natural Gas or LNG, oilfield services and chemicalrefining engineering projects. Sinopec Group Company’s overseas asset portfolio includes oil and gas developmenta limited number of projects in Iran, Sudan and Syria, which countries that are targets ofsubject to U.S. sanctions administrated by OFAC and by the U.S. Department of State. In 2013, Sinopec International Petroleum E&P Hongkong Overseas Limited,2015, we acquired a joint venture owned by Sinopec Group Company and us on an equal basis, acquired from Sinopec Group Company 49% interest10% shareholding stake in Taihu which is engaged in oil and gas exploration, development and production business in Russia.PAO SIBUR Holding (Sibur Holding). Starting from 2014, OFAC imposed economic sanctions against Russia focusing on trading activities involving certain Russia’sRussian financial and energy entities. We currently do not believe that our investment in TaihuSibur Holding will result in any direct sanctions imposed by OFAC. However, events in or relating to Russia, including further trade restrictions and other sanctions, could adversely impact our investment in Russia. In addition, the United States may expand its sanctions regime to include other countries or regions where Sinopec Group Company or its affiliates, including us, may have assets or operations.operations, or may unilaterally reinstate its sanction regime in Iran, where most U.S. secondary sanctions (i.e., those covering non-U.S. persons) have been suspended since January 16, 2016 pursuant to the terms of the Joint Comprehensive Plan of Action (the JCPOA), in the event of a dispute over Iran’s compliance with its nuclear commitments under the JCPOA. We cannot predict the interpretation or implementation of government policy at the U.S. federal, state or local levels with respect to any current or future activities by Sinopec Group Company or its affiliates, including us, in countries or with individuals or entities that are the subject of U.S. sanctions. Similarly, we cannot predict whether U.S. sanctions will be further tightened or reinstated in the case of Iran, or the impact that such actions may have on Sinopec Group Company and us.  It is possible that the United States could subject Sinopec Group Company and us to sanctions due to these activities. Certain U.S. state and local governments and colleges have restrictions on the investment of public funds or endowment funds, respectively, in companies that are members of corporate groups with activities in certain countries that are the subject of U.S. sanctions. These investors may not wish to invest, and may divest their investment, in us
16

because of our relationship with Sinopec Group Company and its investments and activities in those OFAC sanctioned countries. It is possible that, as a result of activities by Sinopec Group Company or its affiliates in countries that are the subject of U.S. sanctions, we may be subject to negative media or investor attention, which may distract management, consume internal resources and affect investors’ perception of our company.
Further, the Iran Sanctions Act, as amended, and other U.S. laws and Executive Orders, authorize the imposition of sanctions on companies that engage in certain activities in and with Iran, especially in Iran’s energy sector. It is possible that Sinopec Group Company or its affiliates engage in activities that are targeted for sanctions by U.S. laws. It is possible that the U.S. government would determine, and in the event that the U.S. government so determines, that Sinopec Group Company or an entity it owns or controls, had engaged in any such activities and Furthermore, if the most extreme sanction blocking, wasmeasures under U.S. sanctions laws were applied to the properties of Sinopec Group Company’s property, includingCompany and its controlled subsidiaries, Sinopec Group Company could be prohibited from engaging in business activities in the United States or with U.S. individuals or entities, and U.S. transactions in our securities and distributions to U.S. individuals and entities with respect to our securities could also be prohibited.
Risks Relating to the PRC
Government regulations may limit our activities and affect our business operations.
The PRC government, though gradually liberalizing its regulations on entry into the petroleum and petrochemical industry, continues to exercise certain controls over the petroleum and petrochemical industry in China. These control mechanisms include granting the licenses to explore and produce crude oil and natural gas, granting the licenses to market and distribute crude oil and refined petroleumoil products, regulating the upper limit of the retail prices for gasoline and diesel; collecting special oil income levies, deciding import and export quotas and procedures, setting safety, environmental and quality standards, and formulating policies to save energy and reduce emission; meanwhile, there could be potential changes to macroeconomic and industry policies such as reforming of the oil and gas industry, further improvement of pricing mechanism of petroleumrefined oil products, reforming and improvement of pricing mechanism of natural gas, and reforming in resource tax and environmental tax, which could impact our production and operations. Such control mechanisms may have material effects on our operations and profitability.
16

On the other hand, the PRC government has been gradually relaxing the control over imports of crude oil and refined oil products, which may result in refining overcapacity in China and intensify competition among refining companies in China. Such relaxation of the import control may have material and adverse effects on our refining margin, including procurement cost of imported crude oil and lower prices of refined oil products.
The PRC governmental authorities, from time to time, audit or inspect our ultimate controlling shareholder. We cannot predict the impact if any, of their outcome on our reputation, business and financial condition as well as the trading prices of our ADSs and H shares.
The PRC governmental authorities, from time to time, perform audits, inspections, inquiries or similar actions on state-owned companies, such as Sinopec Group Company, our ultimate controlling shareholder. Such inspections are not conducted on a regular basis with specific targets, and therefore we cannot predict the outcome of these governmental activities. If, as a result of such audits, inspections or inquiries, (i) material irregularities are found within Sinopec Group Company or us or our employees or (ii) Sinopec Group Company or we become the target of any negative publicity, our reputation, business and financial condition as well as the trading prices of our ADSs and H shares may be materially and negatively impacted.
Our business operations may be adversely affected by present or future environmental regulations.
As an integrated petroleum and petrochemical company, we are subject to extensive environmental protection laws and regulations in China. These laws and regulations permit:
·the imposition of feespollution charge for the discharge of waste substances;
·the levy of fines and payments for damages for serious environmental offenses;
·the government, at its discretion, to seal up or close down any facility which fails to comply with ordershas cause or may cause environmental damage and require it to correct or stop operations causing environmental damage; and
·litigations and liabilities arising from pollutions and damages to the environment and public interests.
Our production activities produce substantial amounts of liquid, gas and solid waste materials. In addition, our production facilities require operating permits that are subject to renewal, modification and revocation. We have established a system to treat waste materials to prevent and reduce pollution. However, the PRC government has moved, and may move further, toward more rigorous enforcement of applicable laws, and toward the adoption of more stringent environmental standards, which, in turn, would require us to incur additional expenditures on environmental matters.
In recent years, we have commenced exploration and production of unconventional oil and gas resources, such as shale oil and gas and coal bed methane, through the application of relatively advanced and expensive technologies. As a result, our unconventional oil and gas operations are subject to the limitations of unproven technology and expose us to higher environmental compliance standards and requirements. In the event of any failure to comply with such standards
17

and requirements, we may be subject to public concerns about our unconventional oil and gas operations, which may also harm our corporate reputation.
Some of our development plans require compliance with state policies and governmental regulation.
We are currently engaged in a number of construction, renovation and expansion projects. Some of our large construction, renovation and expansion projects are subject to governmental confirmation and registration. The timing and cost of completion of these projects will depend on numerous factors, including when we can receive the required confirmation and registration from relevant PRC government authorities and the general economic condition in China. If any of our key projects required for our future growth are not confirmed or registered, or not confirmed or registered in a timely manner, our results of operations and financial condition could be adversely impacted.
Government control of currency conversion and exchange rate fluctuation may adversely affect our operations and financial results.
We receive a significant majority of our revenues in Renminbi. A portion of such revenues will need to be converted into other currencies to meet our foreign currency needs, which include, among other things:
·import of crude oil and other materials;
17

·debt service on foreign currency-denominated debt;
·purchases of imported equipment;
·payment of the principals and interests of bonds issued overseas; and
·payment of any cash dividends declared in respect of the H shares (including ADS).
The existing foreign exchange regulations have significantly reduced government foreign exchange controls for transactions under the current account, including trade and service related foreign exchange transactions and payment of dividends. Foreign exchange transactions under the capital account, including principal payments in respect of foreign currency-denominated obligations, continue to be subject to significant foreign exchange controls and require the approval of the State Administration of Foreign Exchange. These limitations could affect our ability to obtain foreign exchange through debt or equity financing, or to obtain foreign exchange. The PRC government has stated publicly that it intends to make the Renminbi freely convertible in the future. However, we cannot predict whether the PRC government will continue its existing foreign exchange policy and when the PRC government will allow free conversion of Renminbi.
The exchange rate of the Renminbi against the U.S. dollar and other foreign currencies fluctuates and is affected by, among other things, the changes in the PRC’s and international political and economic conditions. On July 21, 2005, the PRC government introduced a floating exchange rate system to allow the value of the Renminbi to fluctuate within a regulated band based on market supply and demand and by reference to a basket of foreign currencies. On June 19, 2010 and August 11, 2015, respectively, the People’s Bank of China (the “PBOC”)(PBOC) decided to further promote the reform of exchange rate regime and enhance the flexibility of Renminbi exchange rate. Most of our crude oil purchases are settled in foreign currencies calculated on the basis of prices in U.S. dollar. Fluctuations in the exchange rate of the Renminbi against the U.S. dollars and certain other foreign currencies may adversely affect our oil and gas business, financial condition and results of operations.
Meanwhile, prices of refined oil products are guided by the PRC Government and are pegged to the exchange rate of the Renminbi against the U.S. dollar. Therefore the impact of Renminbi exchange rate fluctuation on the purchase cost of crude oil could largely be offset by the corresponding fluctuation in the prices of domestic refined oil products and chemical products.
Risks relating to enforcement of shareholder rights; Mandatory arbitration.
Currently, the primary sources of shareholder rights are our articles of association, the PRC Company Law and the Listing Rules of the Hong Kong Stock Exchange, which, among other things, impose certain standards of conduct, fairness and disclosure on us, our directors and our controlling shareholder. In general, their provisions for protection of shareholder’s rights and access to information are different from those applicable to companies incorporated in the United States, the United Kingdom and other Western countries. In addition, the mechanism for enforcement of rights under the corporate framework to which we are subject may also be relatively undeveloped and untested. To our knowledge, there has not been any published report of judicial enforcement in the PRC by H share shareholders of their rights under constituent documents of joint stock limited companies or the PRC Company Law or in the application or interpretation of
18

the PRC or Hong Kong regulatory provisions applicable to PRC joint stock limited companies. We cannot guarantee that our shareholders will enjoy protections that they may be entitled in other jurisdictions.
China does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States, the United Kingdom or most other Western countries, and therefore recognition and enforcement in China of judgments of a court in any of these jurisdictions in relation to any matter not subject to a binding arbitration provision may not be assured. Our articles of association as well as the Listing Rules of the Hong Kong Stock Exchange provide that most disputes between holders of H shares and us, our directors, supervisors, officers or holders of domestic shares, arising out of the articles of association or the PRC Company Law concerning the affairs of our company, are to be resolved through arbitration, at the election of the claimant, by arbitration organizations in Hong Kong or the PRC, rather than through a court of law. On June 18, 1999, an arrangement was made between Hong Kong and the PRC for the mutual enforcement of arbitral awards. This new arrangement was approved by the Supreme People’s Court of the PRC and the Hong Kong Legislative Council, and became effective on February 1, 2000. We are uncertain as to the outcome of any action brought in China to enforce an arbitral award granted to shareholders.
Our auditor, like other independent registered public accounting firms operating in China, is not permitted to be subject to inspection by Public Company Accounting Oversight Board, and as such, investors may be deprived of the benefits of such inspection.
Our independent registered public accounting firm that issues the audit reports included in our annual reports filed with the SEC, as an auditor of companies that are traded publicly in the United States and a firm registered with the Public Company Accounting Oversight Board, or PCAOB, is required by the laws of the United States to undergo regular inspections by PCAOB to assess its compliance with the laws of the United States and professional standards. Because our auditor is located in China, a jurisdiction where PCAOB is currently unable to conduct inspections without the approval of
18

the PRC authorities, our auditor, like other independent registered public accounting firms, is currently not inspected by PCAOB.
Inspections of other firms that PCAOB has conducted outside of China have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. The lack of PCAOB inspections in China may prevent PCAOB from regularly evaluating our auditor’s audits and quality control procedures. The inability of PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control procedures. As a result, investors may be deprived of the benefits of PCAOB inspections.
Additional remedial measures imposed on certain PRC-based accounting firms, including our independent registered public accounting firm, in proceedings brought by the SEC alleging the firms’ failure to meet specific criteria, could result in financial statements being determined to not be in compliance with the requirements of the Exchange Act.
In December 2012, the SEC brought administrative proceedings against the “Big Four” accounting firms in China, including our independent registered public accounting firm, alleging that these firms had refused to produce audit work papers and other documents related to certain other China-based companies whose securities are publicly traded in the United States. On January 22, 2014, an initial administrative law decision was issued, censuring these accounting firms and barring these firms from practicing before the SEC for a period of six months. The decision is neither final nor legally effective unless and until it is endorsed by the SEC. In February 2015, each of the four PRC-based accounting firms agreed to a censure and to pay a settlement fine to the SEC to settle the dispute and avoid suspension of their ability to practice before the SEC. The settlement requires the firms to follow detailed procedures to seek to provide the SEC with access to Chinese firms’ audit documents via the China Securities Regulatory Commission (the “CSRC”)(CSRC) in response to future document requests by the SEC made through the CSRC. If the firms fail to comply with the documentation production procedures that set forth in the settlement agreement or if these required information fails to be provided to the SEC by the CSRC for reasons out of these firms’ control, the SEC could impose penalties such as suspensions, or it could restart the administrative proceedings.
In the event that the SEC restarts the administrative proceedings, depending upon the final outcome, listed companies in the United States with major PRC operations may find it difficult or impossible to retain auditors in respect of their operations in the PRC, which could result in financial statements being determined to not be in compliance with the requirements of the Exchange Act, including possible delisting. Moreover, any negative news about the proceedings against these audit firms may cause investor uncertainty regarding China-based, United States-listed companies and the market price of our ADSs may be adversely affected.
19

If our independent registered public accounting firm was denied, even temporarily, the ability to practice before the SEC and we were unable to timely find another registered public accounting firm to audit and issue an opinion on our financial statements, our financial statements could be determined not to be in compliance with the requirements of the Exchange Act. Such a determination could ultimately lead to the delay or abandonment of this offering, delisting of our ADSs from the New York Stock Exchange (the “NYSE”)(NYSE) or deregistration from the SEC, or both, which would substantially reduce or effectively terminate the trading of our ADSs in the United States.
ITEM 4.INFORMATION ON THE COMPANY
A.HISTORY AND DEVELOPMENT OF THE COMPANY
Our legal and commercial name is China Petroleum & Chemical Corporation. Our head office is located at 22 Chaoyangmen North Street, Chaoyang District, Beijing 100728, the People’s Republic of China, our telephone number is (8610) 5996-0028 and our fax number is (8610) 5996-0386. We have appointed our representative office in the United States, located at 410 Park515 Madison Avenue, 6/F,Suite 27 West, New York, NY 10022, USA (telephone number: (212) 759-5085; fax number: (212) 759-6882) as our agent for service of processes for actions brought under the U.S. securities laws.
We were established as a joint stock limited company on February 25, 2000 under the Company Law of the PRC with Sinopec Group Company as the sole shareholder at our inception. Our principal businesses consist of petroleum and petrochemical businesses transferred to us by Sinopec Group Company pursuant to a reorganization agreement. Such businesses include:
·exploration for, development, production and marketing of crude oil and natural gas;
19

·refining of crude oil and marketing and distribution of refined petroleumoil products, including transportation, storage, trading, import and export of petroleum products; and
·production and sales of petrochemical products.
Sinopec Group Company’sGroup’s continuing activities primarily consist, among other things, of:
·exploring and developing oil and gas reserves overseas;
·operating certain petrochemical facilities and small capacity refineries;facilities;
·providing geophysical exploration, and well drilling, survey, logging and downhole operational services;
·manufacturing production equipment and providing equipment maintenance services;
·providing construction services;
·providing utilities, such as electricity and water; and
·providing other operational services including transportation services.
Sinopec Group Company transferred the businesses to us either by transferring its equity holdings in subsidiaries or by transferring their assets and liabilities. Sinopec Group Company also agreed in the reorganization agreement to transfer to us its exploration and production licenses and all rights and obligations under the agreements in connection with its core businesses transferred to us. The employees relating to these assets were also transferred to us.
In order to expand our core businesses, prevent competition between us and members of Sinopec Group and reduce related party transactions, between 2001 and 2009 we have acquired Sinopec National Star Petroleum Company, Sinopec Group Maoming Petrochemical Company, Tahe Oilfield Petrochemical Factory and Xi’an Petrochemical Main Factory, certain Petrochemical and Catalyst Assets, certain Refinery Plants and certain service stations, certain Oil Production Plants, Sinopec Hainan and certain downhole operation assets, 100% equity interest of Sinopec Qingdao Petrochemical Company Limited and certain other assets relating to exploration and production, refining and marketing and distribution segments and assets of certain research institutes from Sinopec Group Company. We have also sold and disposed of certain auxiliary assets and chemical assets. In addition, we completed the privatization of Beijing Yanshan Petrochemical Co., Ltd. and Sinopec Zhenhai Refinery and Chemicals Co., Ltd. and the tender offers for the acquisition of publicly-held A-shares of four subsidiaries formerly listed on stock exchanges in China, namely Sinopec Qilu Petrochemical Co., Ltd., Sinopec Yangzi Petrochemical Co., Ltd., Sinopec Zhongyuan Petroleum Co., Ltd., and Shengli Oil Field Dynamic Co., Ltd.
In 2010, we acquired a 55% equity interest of SSI, from Sinopec Overseas Oil & Gas Limited, a subsidiary of Sinopec Group Company, for a cash consideration of US$1.678 billion. SSI owns a 50% interest in Angola Block 18.
In 2011, we issued RMB 23 billion convertible bonds which are convertible into our A shares. As of December 31, 2014, an aggregate of 1,832,955,041 A shares have been converted from these convertible bonds. As of February 17, 2015, an aggregate of 4,623,769,047 A shares have been converted from these convertible bonds. On the same date, we exercised our redemption right and redeemed all the outstanding amount of these convertible bonds.
In 2012, we received from Sinopec Group Company an undertaking to avoid its competition with us.  For details, please refer to the descriptions under “Item 7. Major Shareholders and Related Party Transactions – A. Major Shareholders”.
On February 14, 2013, we completed a placing of an aggregate of 2,845,234,000 new H shares at a price of HK$8.45 per share. The net proceeds from such placing are approximately HK$23.97 billion.
In 2013, Sinopec International Petroleum E&P Hongkong Overseas Limited, a joint venture owned by Sinopec Group Company and us on an equal basis, acquired from Sinopec Group Company (i) 50% interest in Caspian Investment Resources Ltd. (“CIR”), (ii) 49% interest in Taihu Limited (“Taihu”), and (iii) 50% interest in Mansarovar Energy Colombia Ltd. (“Mansarovar”), for a cash consideration of US$2.711 billion in the aggregate. Each of CIR, Taihu and Mansarovar is engaged in oil and gas exploration, development and production business, with CIR based in Kazakhstan, Taihu in Russia and Mansarovar in Colombia.
20

On February 19, 2014, our board of directors unanimously approved a proposal to restructure our marketing and distribution business and to diversify the ownership of this segment by way of introducing private capital investments, pursuant to which the shareholding percentage for private investors will be determined according to the market conditions. Our board of directors authorized our Chairman, for so long as the aggregate shareholding percentage of private investors does not exceed 30%, to determine the investors, their respective shareholding percentages and the terms and conditions of their participation in the marketing segment and to organize the implementation of the plans for such participation.investments. In April 2014, our ownership, management and control of the assets in the marketing and distribution segment have been transferred to Sinopec Marketing Co., Ltd., one of our wholly owned subsidiaries. On September 12, 2014, Sinopec Marketing Co., Ltd. entered into a capital injection agreement with 25 domestic and foreign investors, pursuant to which the investors will subscribe for certain equity interest in Sinopec Marketing Co., Ltd. As of March 6, 2015, the 25 investors have made an aggregate capital contribution of RMB 105.04 billion, representing 29.58% equity interest in Sinopec Marketing Co., Ltd.
20

On September 12, 2014, in connection with our plan to spin off Sinopec Yizheng Chemical Fibre Company Limited (“Yizheng Chemical”)(Yizheng Chemical), in which we originally owned 40.25% equity interest, we entered into a disposal agreement and a share repurchase agreement with Yizheng Chemical, pursuant to which Yizheng Chemical agreed to transfer to us all of its assets and liabilities. As consideration, our 40.25% equity interest in Yizheng Chemical was repurchased and cancelled by Yizheng Chemical. Subsequently, through a series of inter-group company restructuring steps, Yizheng Chemical was spun off from us in December 2014.
On October 30, 2014, Sinopec Overseas Investment Holdings Limited (“SOI”)(SOI) and Sinopec Chemical Commercial Holdings Company Limited (“SCC”)(SCC), two of our wholly-owned subsidiaries, entered into acquisition agreements with two subsidiaries of Sinopec Group Company, pursuant to which SOI and SCC acquired 99% and 1% membership interests in Sinopec Century Bright Capital Investment (Netherlands) Cooperation U.A. (“COOP”)(COOP), respectively, from the two subsidiaries of Sinopec Group Company with an aggregate consideration of US$562 million. Upon completion of the acquisition, we indirectly held 100% interest in COOP, which holds 37.5% interest in Yanbu Aramco Sinopec Refining Company (YASREF) Limited (“YASREF”)(YASREF). The remaining 62.5% interest in YASREF is held by Saudi Arabian Oil Company. YASREF is mainly engaged in the production and sale of gasoline and diesel oil, petroleum coke and sulfur, benzene and other products in Saudi Abrabia and has a designed processing capability of 3,890 thousand barrels per day,day.
On July 8, 2015, Sinopec Group Company informed us that it planned to  increase its shareholding in the Company in the next twelve-month period through acquisitions of our ordinary shares on the secondary market in its own name or through other concerting parties, but its increased shareholding in the Company would not exceed 2% (inclusive of the shares acquired on July 8, 2015) of our issued and outstanding shares. As of July 7, 2016, Sinopec Group Company had increased its shareholding in the Company by way of acquiring 72,000,000 A shares, representing approximately 0.06% of our issued and outstanding shares. Immediately following the shareholding increase, Sinopec Group Company directly and indirectly held 86,345,821,101 shares of the Company, representing approximately 71.32% of our issued and outstanding shares.
On October 29, 2015, we entered into a joint venture agreement with Saudi Abrabia heavy oil as raw material.Sinopec Assets Management Co., Ltd. (“SAMC”), a wholly-owned subsidiary of Sinopec Group Company, in relation to the formation of Sinopec Shanghai Gaoqiao Petrochemical Co., Ltd. (“Gaoqiao”). We and SAMC subscribed for 55% and 45% of the registered capital of Gaoqiao, respectively, and Gaoqiao became a subsidiary of the Company.
On August 2, 2016, our board of directors unanimously approved the proposal to introduce capitals from potential investors to invest in Sichuan-to-East China gas pipeline project, through our indirectly wholly-owned subsidiary Sinopec Sichuan-to-East China Natural Gas Pipeline Co., Ltd. (“Sichuan-to-East China Pipeline Co.”). On December 12, 2016, China Life Insurance Co., Ltd. (“China Life”) and SDIC Communications Holding Co., Ltd. (“SDIC Communications”) entered into the Capital Injection Agreement in relation to Sichuan-to-East China Pipeline Co. and agreed to collectively subscribe for 50% equity interest in Sichuan-to-East China Pipeline Co. for an aggregate amount of RMB 22.8 billion in cash. Upon completion of the capital injection, China Life, SDIC Communications and us hold 43.86%, 6.14% and 50% equity interest in Sichuan-to-East China Pipeline Co., respectively.
B.BUSINESS OVERVIEW
Exploration and Production
Overview
We currently explore for, develop and produce crude oil and natural gas in a number of areas in China and overseas. As of December 31, 2014,2016, we held 197211 production licenses in China, with an aggregate acreage of 22,91228,436 square kilometers and with terms ranging from 10 to 80 years. Our production licenses may be renewed upon our application at least 30 days prior to the expiration date, which are renewable for unlimited times. During the term of our production license, we pay an annual production license fee of RMB 1,000 per square kilometer.
As of December 31, 2014,2016, we held 288236 exploration licenses in China for various blocks in which we engaged in exploration activities, with an aggregate acreage of approximately 960,981742,600 square kilometers and with the maximum term of seven years. Our exploration licenses may be renewed upon our application at least 30 days prior to the expiration date, with each renewal for a maximum two-year term. We are obligated to make an annual minimum exploration investment in each of the exploration blocks which we obtained the exploration licenses. We are also obligated to pay an annual exploration license fee ranging from RMB 100 to RMB 500 per square kilometer. Under the PRC laws and regulations, however, we are entitled for reduction and exemption of exploration license fee for exploration in the western region, northeast region and offshore of China.
21

As of December 31, 2014,2016, our overseas subsidiary held twoone production licenses,license, with an aggregate acreage of 323 square kilometers. It currently does not have exploration licenses. Our overseas equity-accounted investments held 7071 production licenses, with an aggregate acreage of 4,6864,546 square kilometers, and twoone exploration licenses.
license.
Properties
We currently operate 16 oil and gas production fields in China, each of which consists of many295 oil and gas producing fields and blocks.
21

Shengli production field is our most important crude oil production field. It consists of 7075 producing blocks of various sizes extending over an area of 2,5642,549 square kilometers in northern Shandong province, all of which are our net developed acreage. Most of Shengli’s blocks are located in the Jiyang trough with various oil producing layers. In 2014,2016, Shengli production field produced 198169 million barrels of crude oil and 17.6614.26 billion cubic feet of natural gas, with an average daily production of 550470.16 thousand BOE.
As of December 31, 2014,2016, the total acreage of our oil and gas producing fields and blocks in China was 10,58013,927 square kilometers, including 8,3838,479 square kilometers of developed acreage, all of which were net developed acreage; and 2,1975,448 square kilometers of gross undeveloped acreage, all of which were net undeveloped acreage.
As of December 31, 2014,2016, the total acreage of our oil and gas producing fields and blocks of our overseas subsidiary was 323 square kilometers, including 169 square kilometers of developed acreage, of which 57169 square kilometers were net developed acreage; and 154153 square kilometers of gross undeveloped acreage, of which 52153 square kilometers were net undeveloped acreage.
As of December 31, 2014,2016, the total acreage of our oil and gas producing fields and blocks of our overseas equity-accounted investments was 1,7681,690 square kilometers, including 1,5461,582 square kilometers of developed acreage, of which 650765 square kilometers were net developed acreage; and 222108 square kilometers of gross undeveloped acreage, of which 6254 square kilometers were net undeveloped acreage.
Oil and Natural Gas Reserves
As of December 31, 2014,2016, our estimated proved reserves of crude oil and natural gas in China were 3,8192,410 million BOE (including 2,7001,216 million barrels of crude oil and 6,7157,160 billion cubic feet of natural gas), and our estimated proved reserves of crude oil and natural gas outside of China, which included a share of the estimated proved reserves of our equity-accounted investments, were 353.5339 million BOE. Our estimated proved reserves do not include additional quantities recoverable beyond the term of the relevant production licenses, or that may result from extensions of currently proved areas, or from application of improved recovery processes not yet tested and determined to be economical.
The following tables set forth our proved developed and undeveloped crude oil and natural gas reserves by region as of December 31, 2014.2016.

  As of December 31, 20142016 
Crude Oil Proved Reserves (in millions of barrels) 
    
Developed   
Subsidiaries   
China   
Shengli  1,917801 
Others  548279 
Overseas(1)
  6440 
Subtotal  2,5291,120 
Equity-accounted investments    
Overseas(2)
China		  253-
Overseas273 
Subtotal  253273 
Total Developed  2,7821,393 
Undeveloped    
Subsidiaries    
China    
Shengli  10537 
Others  13099 

22

Overseas(1)
  8- 
Subtotal  243136 
Equity-accounted investments    
China
-
Overseas(2)  23 
Subtotal  23 
Total Undeveloped  266159 
Total Oil Proved Reserves  3,0481,552 
22


  
As of December 31, 2014
2016
 
Natural Gas Proved Reserves (in billions of cubic feet) 
    
Developed   
Subsidiaries   
China   
Puguang  2,6632,330 
Others(1)
Fuling		  3,3241,226
Others2,880 
Overseas  - 
Subtotal  5,9876,436 
Equity-accounted investments    
Overseas(2)
China		  24-
Overseas18 
Subtotal  2418 
Total Developed  6,0116,454 
Undeveloped    
Subsidiaries    
China    
Puguang  - 
Fuling-
Others  728724 
Overseas(1)
  - 
Subtotal  728724 
Equity-accounted investments    
Overseas(2)
China		  2-
Overseas- 
Subtotal  2- 
Total Undeveloped  730724 
Total Natural Gas Proved Reserves  6,7417,178 
 ______________________
(1)In 2010, we acquired from Sinopec Group Company part of its interests in Angola Block 18. The proved reserves amount of our overseas subsidiary is the net reserves amount of SSI after deducting the government’s amount-sharing. We hold a 55% equity interests in SSI.
(2)In 2013, a joint venture, owned by Sinopec Group Company and us on an equal basis, acquired from Sinopec Group Company (i) 50% interest in CIR, (ii) 49% interest in Taihu, and (iii) 50% interest in Mansarovar. The proved reserves amount reflects the joint venture’s shares in CIR, Taihu and Mansarovar.

As of December 31, 2014,2016, approximately 266159 million barrels of our crude oil proved reserves and 730724 billion cubic feet of our natural gas proved reserves were classified as proved undeveloped reserves in China and overseas, among which approximately 4.67 million barrelsoverseas. An insignificant amount of our crude oil proved reserves and 62.87 billion cubic feet of ouror natural gas proved reserves in China werehave been classified as proved undeveloped reserves for more than five years, due to international factors. These reserves are mostly located in our Shanghai branch.years.

During 2014,2016, a total of 1,427621 wells were drilled by us in China and 32399 wells were drilled overseas. We converted 14471 million barrels of proved undeveloped crude oil reserves and 182358 billion cubic feet of proved undeveloped natural gas reserves into proved developed reserves in 2014.2016. Total capital expenditure incurred in converting proved undeveloped reserves into proved developed reserves amounted to RMB 5,366 million,8.6 billion, including RMB 4.18.2 billion and RMB 1,266 million0.4 billion incurred in connection with our operations in China and overseas, respectively, in 2014.2016.

We manage our reserves estimation through a two-tier management system. OurThe Oil and Natural Gas Reserves Management Committee, or the RMC, at our headquarters level oversees the overall reserves estimation process and reviews the reserves estimation of our company. Each of our Branches has a reserves management committee that manages the reserves estimation process and reviews the reserves estimation report at the branches level.

Our RMC is chairedco-led by Mr. Wang Zhigang, oneseveral of our senior vice presidents and is co-led by our deputy chief geologist and our director generalthe head of our exploration and production segment. The current chairman of our RMC, Mr. Wang Zhigang, holds a Ph.D. degree in geology from Geology and Geo-physics Research Institute of the China Academy of Science and has over 30 years of experience in the oil and gas industry. Our
23

The rest of the members of our RMC also consists of 31 other members who are all senior management members in charge of exploration and development activities at production bureau level. A majority of our RMC members hold doctor’s or master’s degrees and our RMC members have an average of 20 years of technical experience in relevant industry fields, such as geology, engineering and economics.

23

Our reserves estimation is guided by procedural manuals and technical guidance. Initial collection and compilation of reserves information are conducted by different working divisions, including exploration, development financial and legalfinancial divisions, at production bureau level. Exploration and development divisions collectively prepare the initial report on reserves estimation. Together with technical experts, reserves management committees at production bureau level then review to ensure the qualitative and quantitative compliance with technical guidance and accuracy and reasonableness of the reserves estimation. At headquarterour headquarters level, the RMC is primarily responsible for the management and coordination of the reserves estimation process, review and approval of annual changes and results in reserves estimation and disclosure of our proved reserves. We also engage outside consultants who assist us to be in compliance with the U.S. Securities and Exchange Commission rules and regulations. Our reserves estimation process is further facilitated by a specialized reserves database which is improvedreviewed and updated periodically.

Oil and Natural Gas Production
In 2014,2016, we produced an average of 1,1771,039 thousand BOE per day in China, of which approximately 72.38%66.6% was crude oil and 27.62%33.4% was natural gas. We produced an average of 139142 thousand BOE per day overseas, of which 98.6%97.2% was crude oil and 1.4%2.8% was natural gas.

The following tables set forth our average daily production of crude oil and natural gas sold for the years ended December 31, 2012, 20132014, 2015 and 2014.2016. The production of crude oil includes condensate.

 
Year Ended December 31,
  Year Ended December 31, 
 
2012
  
2013
  
2014
  2014  2015  2016 
 (in thousands of barrels)  (in thousands of barrels) 
Average Daily Crude Oil Production                  
China           852   812   692 
Subsidiaries  852   812   692 
Shengli  536   540   542   542   527   464 
Others  304   312   310   310   285   228 
Overseas              137   146   138 
Subsidiary(1)
  59   59   42 
Equity-accounted investments(2)
  -   10   95 
Subsidiary  42   54   51 
Equity-accounted investments  95   92   87 
Total Crude Oil Production   899   921   989   989   958   830 

 
Year Ended December 31,
  Year Ended December 31, 
 
2012
  
2013
  
2014
  2014  2015  2016 
 (in millions of cubic feet)  (in millions of cubic feet) 
Average Daily Natural Gas Production                  
China           1,951   1,952   2,083 
Subsidiaries  1,951   1,952   2,083 
Puguang  732   784   761   761   530   362 
Fuling  105   306   486 
Others  905   1024   1,190   1,085   1,116   1,235 
Overseas  -   -   11   11   11   10 
Equity-accounted investments  11   11   10 
Total Natural Gas Production   1,637   1,808   1,962   1,962   1,963   2,093 

______________________
(1)The average daily production of our overseas subsidiary is the net production of SSI after deducting the government’s sharing of production. We hold 55% equity interest of SSI.
(2)The average daily production of our equity-accounted investments reflects our shares of the production in CIR, Taihu and Mansarovar, starting from our acquisition in 2013 of (i) 50% interest in CIR, (ii) 49% interest in Taihu, and (iii) 50% interest in Mansarovar, through a joint venture owned by Sinopec Group Company and us.
Lifting Cost & Realized Prices
The following table sets forth our average lifting costs per BOE of crude oil produced, average sales prices per barrel of crude oil and average sales prices per thousand cubic meters of natural gas for the years ended December 31, 2012, 20132014, 2015 and 2014.2016.
24


24
 
Weighted Average
  
China
  
Overseas(1)
  Weighted Average  China  
Overseas(1)
 
 (RMB)  (RMB) 
For the year ended December 31, 2016         
Average petroleum lifting cost per BOE  108.21   112.19   77.62 
Average realized sales price            
Per barrel of crude oil  240.70   246.10   213.41 
Per thousand cubic meters of natural gas  1,266.03   1,266.03   - 
For the year ended December 31, 2015            
Average petroleum lifting cost per BOE  109.70   111.56   72.20 
Average realized sales price            
Per barrel of crude oil  283.72   280.74   316.15 
Per thousand cubic meters of natural gas  1,519.83   1,519.83   - 
For the year ended December 31, 2014                     
Average petroleum lifting cost per BOE  113.1   113.4   105.07   113.10   113.40   105.07 
Average realized sales price                        
Per barrel of crude oil  554.71   552.73   597.24   554.71   552.73   597.24 
Per thousand cubic meters of natural gas  1,598.99   1,598.99   -   1,598.99   1,598.99   - 
For the year ended December 31, 2013            
Average petroleum lifting cost per BOE  112.56   113.63   91.27 
Average realized sales price            
Per barrel of crude oil  590.86   584.35   671.17 
Per thousand cubic meters of natural gas  1,359.23   1,359.23   - 
For the year ended December 31, 2012            
Average petroleum lifting cost per BOE  110.64   111.47   92.55 
Average realized sales price            
Per barrel of crude oil  632.51   625.79   704.17 
Per thousand cubic meters of natural gas  1,291.65   1,291.65   - 
_______________________

(1)1)The exchange rates we used for overseas data in this table was the averagewere exchange rates for each year ended December 31, 2012, 20132014, 2015 and 2014,2016, which were RMB 6.31256.1428 to US$1.00, RMB 6.19286.2284 to US$1.00 and RMB 6.14286.6400 to US$1.00, respectively.

Exploration and Development Activities
In 2014, we made remarkable progressesthe low oil price environment in 2016, we prioritized high-efficiency exploration activities. We continued our efforts in exploration activities and led to a number of new discoveries of oil resources in Tahe of Xinjiang, Beibu Gulf of Guangxi and Yin'e Basin of Inner Mongolia, and of shale gas resource in Yongchuan area of Sichuan Basin. With respect to development activities, we focused on increasing efficiency and effectiveness by leveragingadjusting our managementdevelopment structures, reducing our inefficient crude oil production and innovation capabilities.high cost activities. We acceleratedsignificantly advanced the development progressconstruction of the second phase of our Fuling shale gas project to improve the production volume, which is the first large-scale shale gas field in China. We continue making steady growth in our crude oil and natural gashas reached an annual production while having the increasevolume of per unit production cost effectively contained. With respect to our oil exploration, we enhanced our exploration efficiency by optimizing the reserves utilization in new fields, increasing the recovery rate in mature fields and effectively curbing the growth in lifting costs. With respect to our natural gas production, we strengthen our management in Puguang and adjusted our marketing and sales strategy to increase sales volumes. With respect to our shale gas development, the first phase of our Fuling project with a production capacity of 5247.2 billion cubic meters is under construction and the average daily production of our production wellsfeet in Fuling have surpassed our expected output. In 2014, we added 431 million barrels to our proved oil reserves.2016.

The following table sets forth the numbers of our exploratory and development wells, including a breakdown of productive wells and dry wells we drilled during the years ended December 31, 2012, 20132014, 2015 and 2014.2016.

 As of December 31, 
 2014  2015  2016 
Number of Drilled Wells Exploratory  Development  Exploratory  Development  Exploratory  Development 
  Productive  Dry  Productive  Dry  Productive  Dry  Productive  Dry  Productive  Dry  Productive  Dry 
China  334   187   3,641   56   373   195   1,801   25   266   149   801   6 
Subsidiaries  334   187   3,641   56   373   195   1,801   25   266   149   801   6 
Shengli  141   64   2,027   30   150   73   1,020   18   166   73   462   5 
Others  193   123   1,614   26   223   122   781   7   100   76   339   1 
Overseas  3   -   323   -   -   1   149   1   2   1   99   - 
Subsidiaries  -   -   6   -   -   -   5   -   -   -   -   - 
Equity-accounted investments  3   -   317   -   -   1   144   1   2   1   99   - 
Total  337   187   3,964   56   373   196   1,950   26   268   150   900   6 
  
Total
  
China
  
Overseas
 
     
Shengli
  
Others
  
Subsidiary
  
Equity-accounted investments
 
For the year ended December 31, 2014               
Exploratory               
Productive  337   141   193   -   3 
Dry  187   64   123   -   - 
Development                    
Productive  3,964   2,027   1,614   6   317 
Dry  56   30   26   -   - 
For the year ended December 31, 2013                    
Exploratory                    
Productive  350   112   238   -   - 
Dry  352   96   256   -   - 
Development                    
Productive  4,513   2,490   2,016   5   2 
Dry  83   39   44   -   - 
For the year ended December 31, 2012                    
Exploratory                    
Productive  329   101   228   -   - 
Dry  682   89   593   -   - 
Development                    
Productive  3,583   2,047   1,532   4   - 
Dry  35   6   29   -   - 

25
The following table sets forth the number of wells being drilled by us as of December 31, 2014,2016, as compared to December 31, 2013:2015:
25

��As of December 31,  As of December 31, 
 
2013
  
2014
  2015  2016 
Number of Drilling Welling Gross  Net  Gross  Net 
 
Gross
  
Net
  
Gross
  
Net
  Exploratory  Development  Exploratory  Development  Exploratory  Development  Exploratory  Development 
China              110   152   110   152   78   138   78   138 
Subsidiaries  110   152   110   152   78   138   78   138 
Shengli  93   93   63   63   35   23   35   23   28   21   28   21 
Others  174   174   247   246   75   129   75   129   50   117   50   117 
Overseas                  -   3   -   1   -   2   -   2 
Subsidiary  1   -   1   - 
Subsidiaries  -   -   -   -   -   -   -   - 
Equity-accounted investments  1   -   2   1   -   3   -   1   -   2   -   2 
Total Wells Drilling  269   267   313   310 
Total  110   155   110   153   78   140   78   140 

The following table sets forth our number of productive wells for crude oil and natural gas as of December 31, 2014,2016, as compared to December 31, 2013:2015:

 
As of December 31,
  As of December 31, 
 
2013
  
2014
  2015  2016 
Productive Wells for Crude Oil 
Gross
  
Net
  
Gross
  
Net
  Gross  Net  Gross  Net 
China              49,662   49,662   49,921   49,921 
Subsidiaries  49,662   49,662   49,921   49,921 
Shengli  28,844   28,844   30,534   30,534   31,547   31,547   32,019   32,019 
Others  17,281   17,281   18,058   18,058   18,115   18,115   17,902   17,902 
Overseas                  6,913   3,122   7,432   3,614 
Subsidiary  23   7   25   8 
Subsidiaries  28   15   28   14 
Equity-accounted investments   1,604   468   7,102   2,778   6,885   3,107   7,404   3,600 
Total  47,752   46,600   55,719   51,378   56,575   52,784   57,353   53,535 

 
As of December 31,
  As of December 31, 
 
2013
  
2014
  2015  2016 
Productive Wells for Natural Gas 
Gross
  
Net
  
Gross
  
Net
  Gross  Net  Gross  Net 
China              4,758   4,727   4,966   4,932 
Subsidiaries  4,758   4,727   4,966   4,932 
Puguang  53   53   54   54   55   55   57   57 
Fuling  175   175   253   253 
Others  4,179   4,159   4,496   4,471   4,528   4,497   4,656   4,622 
Overseas  -   -   -   - 
Total  4,232   4,212   4,550   4,525   4,758   4,727   4,966   4,932 

Refining
Overview
In 2014,2016, our refinery throughputs were approximately 235236 million tonnes. We produce a full range of refined petroleumoil products. The following table sets forth our production of our principal refined petroleumoil products for the years ended December 31, 2012, 20132014, 2015 and 2014.2016.
  
Year Ended December 31,
 
  
2012
  
2013
  
2014
 
  (in million tonnes) 
Gasoline  40.55   45.56   51.22 
Diesel  77.39   77.40   74.26 
Kerosene and jet fuel  15.01   17.43   20.75 
Light chemical feedstock  36.33   37.97   39.17 
Liquefied petroleum gas  9.92   10.56   11.25 
Fuel oil  2.38   3.17   2.48 
26

  Year Ended December 31, 
  2014  2015  2016 
  (in million tonnes) 
Gasoline  51.22   53.98   56.36 
Diesel  74.26   70.05   67.34 
Kerosene and jet fuel  20.75   24.35   25.47 
Light chemical feedstock  39.17   38.81   38.54 
Liquefied petroleum gas  11.25   11.58   12.12 
Fuel oil  2.48   1.48   0.94 
Gasoline and diesel are our largest revenue producingrevenue-generating products, and are sold mostly through our marketing and distribution segment through both wholesale and retail channels. We use most of our production of chemical feedstock as feedstock for our own chemical operations. Most of our other refined petroleumoil products were sold in China to a wide variety of industrial and agricultural customers, and a small amount areis exported.
26
Refining Facilities
Currently we operate 3432 refineries in China. As of December 31, 2014,2016, our total primary distillation capacity of crude oil was 292.40295 million tonnes per annum.
The following table sets forth our total primary distillation capacity per annum of crude oil and refinery throughputs as of and for the years ended December 31, 2012, 20132014, 2015 and 2014.2016.
 
As of and for the Year Ended December 31,
  As of and for the Year Ended December 31, 
 
2012
  
2013
  
2014
  2014  2015  2016 
Primary distillation capacity of crude oil (million tonnes per annum)(1)  260.90   282.20   292.40   292.40   293.20   294.7 
Refinery throughputs (million tonnes)(2)
  221.31   231.95   235.38   235.38   236.49   235.5 
_______________________
Notes:

(1) The primary distillation capacity and refinery throughputs of joint ventures are fully included in our statistics.

(2) When calculating refinery throughputs, conversion from tonnes to barrels are made at a rate of one tonne to 7.35 barrels.

In 2014,2016, measured by the total output from our refineries, our gasoline yield was 21.76%22.1%, diesel yield was 31.55%26.4%, kerosene yield was 8.82%10.0%, and light chemical feedstock yield was 16.65%15.1%. Other products include lubricant, liquefied petroleum gas, solvent, asphalt, petroleum coke, paraffin and fuel oil. For the years ended December 31, 2012, 20132014, 2015 and 2014,2016, our overall yield for all refined petroleumoil products at our refineries was 95.15%94.66%, 94.82%94.75% and 94.66% 94.70%, respectively.
The following table sets forth the primary distillation capacity per annum as of December 31, 20142016 of each of our refineries with the primary distillation capacity of 8 million tonnes or more per annum.
Refinery
 
Primary Distillation Capacity
as of December 31, 20142016
  (in million tonnes per annum)
Maoming 23.5023.5
Zhenhai 23.0023.0
Jinling 21.0021.0
Shanghai 16.0016.0
Qilu 14.00��14.0
Yangzi14.0
Fujian 14.00
Yangzi14.0 14.00
Tianjin 13.8013.8
Guangzhou13.2
Gaoqiao13.0
Qingdao12.0
Changling11.5
Yanshan 13.50
Guangzhou11.0 13.20
Gaoqiao13.00
Qingdao12.00
Changling11.50
Shijiazhuang 10.0010.0
Jiujiang10.0
Hainan 9.209.2
Luoyang 8.008.0
Wuhan 8.00
Anqing8.0 8.00
27

In 2014,2016, our primary distillation capacity of crude oil increased by 10.21.5 million tonnes per annum, which included an increase of 5.5 million tonnes per annum in the distillation capacity of sour crude.annum. In addition, in 2014,2016, our hydrofining capacity increased by 17.19.9 million tonnes per annum. The revamping projects for a number of refining facilities to improve refined petroleumoil product quality were also completed and put into operation.
Source of crude oil
In 2014,2016, approximately 82.5%87.1% of the crude oil required for our refinery business was sourced from international suppliers.
27
Marketing and Sales of Refined PetroleumOil Products
Overview
We operate the largest sales and distribution network for refined petroleumoil products in China. In 2014,2016, we distributed and sold approximately 170.97170 million tonnes of gasoline, diesel, jet fuel and kerosene. Most of the refined petroleumoil products sold by us are produced internally. In 2014,2016, approximately 81.1%71.9% of our gasoline sales volume and approximately 75.2%74.0% of our diesel sales volumes were produced internally.
The table below sets forth a summary of key data in the marketing and sales of refined petroleumoil products in the years of 2012, 20132014, 2015 and 2014.2016.
 
2012
  
2013
  
2014
  As of December 31, 
Total sales volume of refined petroleum products  173.15   179.99   189.17 
(in million tonnes)            
Domestic sales volume of refined petroleum products  158.99   165.42   170.97 
(in million tonnes)
            
 2014  2015  2016 
Total sales volume of refined oil products
(in million tonnes)
  189.17   189.33   194.84 
Domestic sales volume of refined oil products
(in million tonnes)
  170.97   171.37   172.70 
Retail
  107.85   113.73   117.84   117.84   119.03   120.14 
Wholesale and Distribution
  51.14   51.69   53.13   53.13   52.34   52.56 
Average annual throughput of service stations (in tonnes per station)
  3,498   3,707   3,858   3,858   3,896   3,926 
                        
 
As of December 31,
             
  2012   2013   2014  As of December 31, 
  2014   2015   2016 
Total number of service stations under Sinopec brand  30,836   30,536   30,551   30,551   30,560   30,603 
Self-operated service stations
  30,823   30,523   30,538   30,538   30,547   30,597 

Retail
All of our retail sales are made through a network of service stations and petroleum shops operated under the Sinopec brand. Through this unified network we are more able to implement consistent pricing policies, maintain both product and service quality standards and more efficiently deploy our retail network.
In 2014,2016, we sold approximately 117.84120.14 million tonnes of gasoline, diesel and kerosene through our retail network, representing approximately 68.9%69.6% of our total domestic gasoline, diesel, jet fuel and kerosene sales volume. Our retail network mainly consists of service stations that are wholly-owned and operated by us, and jointly-owned and generally operated or leased by us, all of which are operated under the Sinopec brand. We also franchised the Sinopec brand to third parties services stations. As of December 31, 2014,2016, we had 136 franchised service stations that are owned and operated by third parties. In 2014,2016, the average annual throughput of our service stations increased by 4.1%slightly from 2013,2015, and we have further strengthened our leading position in our principal market, and further improved our brand awareness and customer loyalty.
28

Wholesale and Distribution
In 2014,2016, we sold approximately 53.1352.56 million tonnes of refined petroleumoil products, including 4.957.23 million tonnes of gasoline, 13.1429.86 million tonnes of diesel and 35.0415.47 million tonnes of kerosene, through wholesale and distribution to long-term large-scale end users and independent distributors such as domestic industrial enterprises, railways, airlines, hotels, restaurants and agricultural producers.producers and long-term large-scale end users such as railways, airlines, shipping and public utilities.
For our wholesale and distribution business, weWe operate 383367 storage facilities with a total capacity of approximately 16.2016.89 million cubic meters, substantially all of which are wholly-owned by us. These storage facilities and our wholesale centers are connected to our refineries by railway, waterway and pipelines. We also own some dedicated railways, oil wharfs and oil barges, as well as a number of rail tankers and oil trucks.
28
Chemicals
Overview
We are the largest petrochemicals producer in China. We produce a full range of petrochemicalchemical products including intermediate petrochemicals, synthetic resins, synthetic fiber monomers and polymers, synthetic fibers and synthetic rubber and chemical fertilizers.rubber. Synthetic resins, synthetic fibers, synthetic rubber and some intermediate petrochemicals comprise a significant majority of our external sales. Synthetic fiber monomers and polymers and intermediate petrochemicals, on the other hand, are mostly internally consumed as feedstock for the production of other chemical products. Our chemical operations are integrated with our refining businesses, which supply a significant portion of our chemical feedstock such as naphtha. We also adjustDue to the high demand in China, we sell substantially all of our petrochemical production lines by strategic investments.
chemical products in China.
Products
Intermediate Petrochemicals
We are the largest ethylene producer in China. Our rated ethylene capacity as of December 31, 20142016 was 10.3710.69 million tonnes per annum. In 2014,2016, we produced 10.7011.06 million tonnes of ethylene. Nearly all of our olefins production is used as feedstock for our petrochemical operations.
We produce aromatics mainly in the forms of benzene and para-xylene, which are used primarily as feedstock for purified terephthalic acid, or PTA, the preferred raw material for polyester. We are the largest aromatics producer in China.
Chemicals extracted from olefins and aromatics are mainly used to produce synthetic resins, synthetic rubber and synthetic fibers, as well as intermediate petrochemicals.
The following table sets forth our rated capacity per annum, production volume and major plants of production as of or for the year ended December 31, 20142016 for our principal intermediate petrochemicalchemical products.
 
Our Rated Capacity
  
Our Production
 
Major Plants of Production
 
Our Rated
Capacity
  
Our
Production
 
 
Major Plants of Production
 (thousand tonnes per annum)  (thousand tonnes)   (thousand tonnes per annum)  (thousand tonnes)  
Ethylene  10,370   10,698 Yanshan, Shanghai, Yangzi, Qilu, Maoming, Guangzhou, Tianjin, Zhongyuan, SECCO*, BASF-YPC*, Fujian*, Zhongsha (Tianjing)*, Zhenhai and Sino-Korean (Wuhan)*  10,694   11,059 Yanshan, Shanghai, Yangzi, Qilu, Maoming, Guangzhou, Tianjin, Zhongyuan, SECCO*, BASF-YPC*, Fujian, Zhongsha (Tianjing)*, Zhenhai, Sino-Korean (Wuhan)* and Great Wall EC*
Propylene  9,610   8,887 Yanshan, Shanghai, Yangzi, Qilu, Maoming, Guangzhou, Tianjin, Zhongyuan, SECCO*, BASF-YPC*, Gaoqiao, Anqing, Jinan, Jingmen, Fujian*, Zhongsha (Tianjing)*, Zhenhai and Sino-Korean (Wuhan)*  9,924   8,988 Yanshan, Shanghai, Yangzi, Qilu, Maoming, Guangzhou, Tianjin, Zhongyuan, SECCO*, BASF-YPC*, Gaoqiao*, Anqing, Jinan, Jingmen, Fujian, Zhongsha (Tianjing)*, Zhenhai, Sino-Korean (Wuhan)* and Great Wall EC*
Benzene  5,256   3,996 Yanshan, Shanghai, Yangzi, Qilu, Guangzhou, Zhenhai, Tianjin, Luoyang, SECCO* and BASF-YPC*  5,363   4,001 Yanshan, Shanghai, Yangzi, Qilu, Guangzhou, Zhenhai, Tianjin, Luoyang, SECCO*, BASF-YPC*, Fujian*, Maoming, Hainan and Sino-Korean (Wuhan)*
Styrene  2,126   2,003 Yanshan, Qilu, Guangzhou, Maoming, SECCO* and Zhenhai  2,196   2,118 Yanshan, Qilu, Guangzhou, Maoming, SECCO*, Zhenhai and BASF-YPC*
Para-xylene  4,839   4,791 Shanghai, Yangzi, Qilu, Tianjin, Luoyang, Zhenhai, Jinling, Fujian* and Hainan  4,839   4,331 Shanghai, Yangzi, Qilu, Tianjin, Luoyang, Zhenhai, Jinling, Fujian* and Hainan
Phenol  608   630 Yanshan, Gaoqiao and Zhongsha (Tianjin)  757.5   613 Yanshan, Gaoqiao* and Zhongsha (Tianjin)*
_______________________
* Joint ventures, of which the production capacities and outputs are fully included in our statistics.

29

Synthetic Resins
We are the largest producer of polyethylene, polypropylene and polystyrene and supplier of major synthetic resins products in China.
The following table sets forth our rated capacity per annum, production volumes and major plants of production for each of our principal synthetic resins as of or for the year ended December 31, 2014.2016.

 
Our Rated Capacity
  
Our Production
 
Major Plants of Production
 
Our Rated
Capacity
  
Our
Production
 Major Plants of Production
 (thousand tonnes per annum)  (thousand tonnes)   
(thousand tonnes
per annum)
  (thousand tonnes)  
Polyethylene
  6,889   7,111 Yanshan, Shanghai, Yangzi, Qilu, Maoming, Guangzhou, Tianjin, Zhongyuan, SECCO*, BASF-YPC*, Fujian*, Zhongsha (Tianjing)*, Zhenhai and Sino-Korean (Wuhan)*  7,190   7,272 Yanshan, Shanghai, Yangzi, Qilu, Maoming, Guangzhou, Tianjin, Zhongyuan, SECCO*, BASF-YPC*, Fujian, Zhongsha (Tianjing)*, Zhenhai, Sino-Korean (Wuhan)* and Great Wall EC*
Polypropylene
  6,605   6,212 Yanshan, Shanghai, Yangzi, Qilu, Guangzhou, Maoming, Tianjin, Zhongyuan, SECCO*,  Jingmen, Fujian*, Zhongsha (Tianjing)*, Zhenhai and Sino-Korean (Wuhan)*  7,415   6,489 Yanshan, Shanghai, Yangzi, Qilu, Guangzhou, Maoming, Tianjin, Zhongyuan, SECCO*, Jingmen, Fujian, Zhongsha (Tianjing)*, Zhenhai, Sino-Korean (Wuhan)* and Great Wall EC*
Polyvinyl chloride
  600   224 Qilu  600   231 Qilu
Polystyrene
  750   649 Yanshan, Qilu, Maoming, Guangzhou, BASF-YPC* and SECCO*  698   588 Yanshan, Qilu, Maoming, Guangzhou, and SECCO*
Acrylonitrile butadiene styrene  200   108 Gaoqiao  200   166 Gaoqiao*
_______________________
* Joint ventures, of which the production capacities and outputs are fully included in our statistics.

Synthetic Fiber Monomers and Polymers
Our principal synthetic fiber monomers and polymers are purified terephthalic acid, ethylene glycol, acrylonitrile, caprolactam, polyester, polyethylene glycol and polyamide fiber. Based on our 20142016 production, we are the largest producer of ethylene glycol and caprolactam in China. Most of our production of synthetic fiber monomers and polymers are used as feedstock for synthetic fibers.
The following table sets forth our rated capacity per annum, our production volume and major plants of production as of or for the year ended December 31, 20142016 for each type of our principal synthetic fiber monomers and polymers.
 
Our Rated Capacity
  
Our Production
 
Major Plants of Production
 
Our Rated
Capacity
  
Our
Production
 Major Plants of Production
 (thousand tonnes per annum)  (thousand tonnes)   (thousand tonnes per annum)  (thousand tonnes)  
Purified terephthalic acid
  3,119   2,476 Shanghai, Yangzi, Yizheng, Tianjin and Luoyang  3,119   2,494 Shanghai, Yangzi, Yizheng, Tianjin and Luoyang
Ethylene glycol
  2,809   1,935 Yanshan, Shanghai, Yangzi, Tianjin, Maoming, BASF-YPC*, Zhongsha (Tianjing)*, Zhenhai and Hubei  3,209   2,432 Yanshan, Shanghai, Yangzi, Tianjin, Maoming, BASF-YPC*, Zhongsha (Tianjing)*, Zhenhai
Acrylonitrile
  810   737 Shanghai, Anqing, Qilu and SECCO*  1,070   952 Shanghai, Anqing, Qilu and SECCO*
Caprolactam
  660   530 Shijiazhuang and Baling  709   557 Shijiazhuang and Baling
Polyester   3,168   2,588 Shanghai, Yizheng, Tianjin and Luoyang  3,378   2,798 Shanghai, Yizheng, Tianjin and Luoyang
_______________________

* Joint ventures, of which the production capacities and outputs are fully included in our statistics.

30

Synthetic Fibers
We are the largest producer of acrylic fibers in China. Our principal synthetic fiber products are polyester fiber and acrylic fiber.
The following table sets forth our rated capacity per annum, production volume and major plants of production for each type of our principal synthetic fibers as of or for the year ended December 31, 2014.2016.
 
Our Rated Capacity
  
Our Production
 
Major Plants of Production
 
Our Rated
Capacity
  
Our
Production
 Major Plants of Production
 (thousand tonnes per annum)  (thousand tonnes)   (thousand tonnes per annum)  
(thousand
tonnes)
  
Polyester fiber   1,227   1,053 Yizheng, Shanghai, Tianjin and Luoyang  1,220   1,004 Yizheng, Shanghai, Tianjin and Luoyang
Acrylic fiber   265   257 Shanghai, Anqing and Qilu 265   233 Shanghai, Anqing and Qilu

Synthetic Rubbers
Our principal synthetic rubbers are cis-polybutadiene rubber, styrene butadiene rubber, or SBR, styrene butadiene-styrene thermoplastic elastomer and isobutadiene isoprene rubber, or IIR. Based on our 20142016 production, we are the largest producer of SBR and cis-polybutadiene rubber in China.
The following table sets forth our rated capacity per annum, production volume and major plants of production as of or for the year ended December 31, 20142016 for each of our principal synthetic rubbers.
  
Our Rated
Capacity
  
Our
Production
 Major Plants of Operation
  
(thousand tonnes
per annum)
  
(thousand
tonnes)
  
Cis-polybutadiene rubber  420   359 Yanshan, Qilu, Maoming and Yangzi
Styrene butadiene rubber  430   357 Qilu, Gaoqiao* and Yangzi
Styrene-butadiene-styrene thermoplastic elastomers  140   98 
Yanshan and Maoming
Isobutylene isoprene rubber  135   12 Yanshan
Isoprene rubber  30   0 Yanshan
Ethylene propylene rubber  75   30 Gaoqiao*
  
Our Rated Capacity
  
Our Production
 
Major Plants of Operation
  (thousand tonnes per annum)  (thousand tonnes)  
Cis-polybutadiene rubber
  540   418 Yanshan, Qilu, Maoming and Gaoqiao
Styrene butadiene rubber
  430   403 Yanshan, Qilu, Maoming and Gaoqiao and Yangzi
Styrene-butadiene-styrene thermoplastic elastomers  140   93 Yanshan and Maoming
Isobutylene isoprene rubber
  135   26 Yanshan
Isoprene rubber  30   0 Yanshan

Synthetic Ammonia and Urea_______________________
 
We produce synthetic ammonia* Joint ventures, of which is used to manufacture caprolactamthe production capacities and acrylic nitrile and for external sale. We have ceased production of ureaoutputs are fully included in the first half of 2014.our statistics.
The major companies of our production for synthetic ammonia for the year ended December 31, 2014 were Sinopec Anqing Company, Sinopec Baling Company and Sinopec Hubei Chemical Fertilizer Company.

Marketing and Sales of Petrochemicals
Most of our petrochemicals sales revenue come fromare generated in China. Price and volume of petrochemical sales are primarily market driven. The southern and eastern regions in China, where most of our petrochemical plants are located, constitute the major petrochemical market in China. Our proximity to the major petrochemical market gives us a geographic advantage over our competitors.
Our principal sales and distribution channels consist of (i) direct sales to end-users, most of which are large- and medium-sized manufacturing enterprises, andwhich account for more than 70% of our customers, (ii) sales to distributors. We also provided after-sale servicesdistributors, who are responsible for sales and distribution to a portion of our smaller and scattered customers including technical support. We continuously strive to improveor specific customers, and (iii) sales of chemical products through our product mix and enhancee-commerce platform “Chem E-Mall”, which effectively expands our product quality to meet market needs.
31

traditional sales channels.
Competition
Refining and Marketing of Refined PetroleumOil Products
Market participants compete primarily on the basis of wide-established sales network and logistics system, quality of products and service, efficiency of operations including proximity to customers, awareness of brand name and price. While we constantly face competition from other market participants, we believe that we have a competitive advantage in our principal market against our competitors.
31

Chemicals
We compete with domestic and foreign chemicals producers in the chemicals market. We believe our proximity to customers has given us significant geographical advantages. Most of our petrochemical production facilities are located in the eastern and southern regions in China, an area which has experienced higher economic growth rates in China in the past thirty years. Proximity of our production facilities to our markets has given us an advantage over our competitors in terms of easy access to our customers, resulting in lower transportation costs, more reliable delivery of products and better service to customers.
Patents and Trademarks
In 2014,2016, we were granted 3,0113,942 patents in China and overseas. As of December 31, 2014,2016, we owned a total of 14,58022,291 patents in China and overseas.
In 2016, we have 391 material trademarks approved internally, among which 241 are registered in China and 150 registered overseas.
Business Operations Relating to Iran Threat Reduction and Syria Human Rights Act of 2012
In 2014,2016, we sourced a small amount of crude oil from Iran, and such amount represented 4.1%7.9% of our total refinery throughputs. In addition, we engaged in a small amount of trading activities with an Iranian company withwhich generated us a net profit of approximately US$1.622.64 million.

Based on feedback to our inquiries to Sinopec Group Company, our controlling shareholder, Sinopec Group Company engaged in a small amount of business activities in Iran such as providing engineering services and designs. Sales revenue from these business activities accounted for 0.018%0.0008% of its total unaudited sales revenue.

Since we have performance obligations under our Iran-related contracts, we are legallycontractually required to continue our performance of part of Iran relatedunder our Iran-related contracts in 2015.2017.

Regulatory Matters
Overview
China’s petroleum and petrochemical industry has seen significant liberalization in the past ten years. However, the exploration, production, marketing and distribution of crude oil and natural gas, as well as the production, marketing and distribution of certain refined petroleumoil products are still subject to regulation of many government agencies including:

National Development and Reform Commission (the “NDRC”)(NDRC)

The NDRC is responsible for formulating and implementing key policies in respect of petroleum and petrochemical industry, including:

·Formulating guidance plan for annual production, import and export amount of crude oil, natural gas and petroleum products nationwide based on its forecast on macro-economic conditions in China;
·Setting the pricing policy for refined oil products;
·Approving certain domestic and overseas resource investment projects which are subject to NDRC’s approval as required by the Catalogue of Investment Projects Approved by the Government (2014);in effect; and
National Energy Administration (NEA)

NEA is primarily responsible for the formulation of energy development plans and annual directive plans, approving major energy-related projects and facilitating the implementation of sustainable development of energy strategies, coordinating the development and utilization of renewable energies and new energies, and organizing matters relating to energy conservation and comprehensive utilization as well as environmental protection for the energy industry.
32

The Ministry of Commerce (the “MOFCOM”)

32
(MOFCOM)

MOFCOM is responsible for examining and approvingthe record-filing of Sino-foreign equity joint venture contracts and Sino-foreign cooperation joint venture contracts, forand monitoring the foreign investors’ oil and gas development withinexploration projects in the PRC. It is also responsible to issuefor approving or filing of the overseas investment by PRC enterprises and  issuing the enterprise overseas investment certificate and quotas and licenses for import and export of crude oil and refined oil products.

In November 2010, we were approved by four Ministries including MOFCOM to become one of the first trial enterprises to cooperate with international business partners and develop coal bed methane resources (MOFCOM Circular 984[2010]).

Ministry of Land and Resources (the “MLR”)(MLR)

The MLR is responsible for issuing the licenses that are required to explore and produce crude oil and natural gas in China.

Regulation of Exploration and Production
Exploration and Production Rights
The PRC Constitution provides that all mineral and oil resources belong to the state. In 1986, the Standing Committee of the National People’s Congress passed the Mineral Resources Law which authorizes the Ministry of Land and Resources, or the MLR, to exercise administrative authority over the exploration and production of the mineral and oil resources within the PRC, including its territorial waters. The Mineral Resources Law and its supplementary regulations provide the basic legal framework under which exploration licenses and production licenses are granted. The MLR has the authority to grant exploration licenses and production licenses on a competitive bidding or other basis it considers appropriate. Applicants for these licenses must be companies approved by the State Council to engage in oil and gas exploration and production activities. Currently, only we PetroChina, China National Offshore Oil Corporation (CNOOC) and Yanchang Petroleum Group Ltd.are one of the few companies that have received such exploration licenses and production licenses in oil and gas industry. In addition, pursuant to the Regulation on the Administration of Geological Survey Qualifications promulgated by the State Council, which became effective from July 1, 2008, any entity engaging in geological survey activities shall obtain a geological survey qualification certificate. Oil and natural gas survey qualifications, among others, shall be examined, approved and granted by the MLR.
Applicants for exploration licenses must first submit applications to the MLR with respect to blocks in which they intend to engage in exploration activities. The holder of an exploration license is obligated to make an annual minimum exploration investment and pay annual exploration license fees, ranging from RMB 100 to RMB 500 per square kilometer, relating to the exploration blocks in respect of which the license is issued. The maximum term of an exploration license for oil and natural gas exploration license is 7 years. TheSuch exploration license may be renewed upon application by the holder at least 30 days prior to expiration date, with each renewal for a maximum two-year term.
At the exploration stage, an applicant can also apply for a progressive exploration and production license that allows the holder to test and develop reserves not yet fully proved. The progressive oil and gas exploration and production license for oil and natural gas has a maximum term of 15 years. When the reserves become proved for a block, the holder must apply for a full production license in order to undertake production.
The MLR issues full production licenses to applicants on the basis of the reserve reports approved by relevant authorities. The maximum term of a full production license is 30 years unless a special dispensation is given by the State Council. Due to a special dispensation granted to us by the State Council, the maximum term of our full production licenses is 80 years. The full production license is renewable upon application by the holder at least 30 days prior to expiration of the original term. A holder of the full production license has to pay an annual full production right usage fee of RMB 1,000 per square kilometer.
Exploration and production licenses do not grant the holders the right to enter upon any land for the purpose of exploration and production. Holders of exploration and production licenses must separately obtain the right to use the land covered by the licenses, and if permissible under applicable laws, current owners of the rights to use such land may transfer or lease the land to the license holder.
Incentives for Shale Gas Development
In order to incentivize the exploration, discovery and development of China’s shale gas reserves, to increase the supply of natural gas and to relieve the imbalance between supply and demand of natural gas, the Ministry of Finance of
33
China and China National Energy Administration issued the Notice on Subsidy for Shale Gas Development and Utilization (Ministry of Finance No. 847 [2012]), pursuant to which the central government will subsidize shale gas production companies at a rate of RMB 0.4 per cubic meter of shale gas produced from 2012 to 2015.
China National Energy Administration issued the Shale Gas Industry Policy (the “Policy”(NEA No. 5 [2013]) onin October, 22, 2013, which classifies shale gas as a “national strategic new industry” and calls for more fiscal support for exploration and development of shale gas. In particular, according to the Notice on Introduction of Subsidy Policy for Development and
33

Utilization of Shale Gas jointly issued by the Ministry of Finance and China National Energy Administration, subsidies should be given directly to a shale gas production company according to the amount of its shale gas development and utilization. Local governments are also encouraged to provide subsidies to shale gas production companies, with the subsidy amount to be determined by local fiscal authorities. The Policy also reduces or waives compensatory fee for mineral resources, license and royalty fees for shale gas production companies. For encouraged projects like shale gas exploration and discovery, the policy also waives customs duty for imported equipment and machineries that cannot be manufactured domestically in accordance with relevant regulations.
In April 2015, to facilitate the development of the shale gas industry, the Ministry of Finance of China and China National Energy Administration issued the Notice on Fiscal Subsidies for Shale Gas Development and Utilization (Ministry of Finance No. 112 [2015]) to further implement the policy of fiscally subsidizing the shale gas industry during the period of the thirteenth “five-year” plan, and the subsidy will be RMB 0.3 per cubic meter of shale gas produced and RMB 0.2 per cubic meter of shale gas produced from 2016 to 2018 and from 2019 to 2020, respectively.
Price Controls on Crude Oil
According to the Measures for Administration of Petroleum Products Price (Trial)(for Trial Implementation) issued by the NDRC on March 26, 2013, the crude oil price shall be determined by the enterprises on their own accord, by reference to the international market price. The price for supplying crude oil by us and CNPC to each other shall be determined by both the parties upon consultation in accordance with the principle that the cost for transporting domestic crude oil to the refinery is equivalent to the cost for importing crude oil from international market to the refinery. The price for providing crude oil by us and the CNPC to local refineries shall be determined in reference to the supply prices between the two corporations. The price of crude oil produced by CNOOC or other enterprises shall be determined on their own accord by reference to the international market price.
According to the Measures for Administration of Petroleum Products Price issued by NDRC on January 13, 2016, the crude oil price shall be determined by the enterprises on their own accord, by reference to the international market price.
Price Controls on Natural Gas
In June 2013, the NDRC released the Circular on Adjustment of the Price of Natural Gas (Fagai Jiage(NDRC Pricing Circular 1246[2013]). Pursuant to the circular, and established a dynamic adjustment mechanism shall be established by linking prices of natural gas to the prices of alternative energy to reflect market demands. A reference ceiling price is set by the government bench-marked against city-gate price, and suppliers and buyers may determine the specific prices through negotiations below the price ceiling.price. The natural gas prices of stock gas and incremental gas shall be differentiated, and the price of incremental gas shall be adjusted in one-go to maintain a reasonable correlations with such alternative energies as fuel oil and liquefied petroleum gas (with the weight of 60% and 40%); stock gas shall refer to the 2012 actual consumption amount, the price of stock gas shall be adjusted step by stepwithin three years to keep pacebe on par with the price of incremental gas, and great efforts shall be made to achieve full adjustment atgas. In the end of the “12th Five-Year Plan” period.  City-gate prices shall be applied to domestic onshore natural gas and imported pipeline natural gas.  Controlmeantime, control over the ex-factory prices of shale gas, coal-bed gas, and coal gas and the gas source price of liquefied natural gas shall be lifted and such prices shall be determined by both the supplier and the buyer through negotiation. Where it is necessary
From 2014 to transmit such gases in a mixed manner in long-distance pipelines2015, NDRC has adjusted the price of non-residential stock natural gas for twice, and sell them together,unified the uniform city-gatestock natural gas and incremental natural gas prices. NDRC has also lifted the price shall be implemented; where such gases are transmitted in a mixed manner in long-distance pipelines, but are sold separately, thecontrol over directly supplied gas source price shall be determined by the supplier and the buyer through negotiation and transportation expenses shall be paidfor end-users.
In November 2015, pursuant to the pipeline transportation service provider atgeneral guideline of furthering the pipeline transportation price as prescribed by the state.
In August 2014, thereform of resource products, NDRC released the Circular on Adjustment of the City-Gate Price of Non-Residential Stock Natural Gas (Fagai Jiage(NDRC Pricing Circular 1835[2014]2688[2015]), which was implemented from September 2014. Ceiling to further liberalize the pricing of natural gas by replacing the reference ceiling price for city-gate prices for stockof non-residential natural gas will be increased by RMB 0.4 per cubic meter, the ceiling city-gate prices for incremental gas will remain unchanged. Due to then stagnant fertilizer market, the adjustment to fertilizer gas price was postponed and the ceiling city-gate prices for residential natural gas was not adjusted.  The circular further lifted control over gas source price of imported LNG and ex-factory prices of shale gas, coal-bed gas, and coal gas. Where it is necessary to transmit such gases in a mixed manner with domestic onshore gas and imported pipeline gas and sell them together, the supplier and the user may enter into separate purchase and transportation contracts for different gas sources. The gas source price and ex-factory price shall be market oriented, the pipeline transportation price shall be subject to relevant regulations. In 2015, the stock natural gas with a reference base rate. Starting from November 2016, suppliers and incrementalbuyers may determine through negotiations the specific prices, subject to the cap of 120% of the reference base rate. Starting from October 2016, NDRC has gradually relaxed the control over service prices for gas storage, gas storage prices and gas prices used for fertilizer production.
Regulation of Pipelines Networks
34
According to the Measures for Regulation of Fair and Open Access to Oil and Gas Pipeline Networks (for Trial Implementation)(NEA No. 84 [2014]), pipeline and facility operators shall equally open pipeline networks and associated facilities to third parties and provide transportation, storage, gasification, liquefaction and compression and other services, if they have surplus capacity. The price for services will be determined by the PRC pricing authorities. Operators will be required to publish information in relation to access standards, service price, conditions and procedures for application regularly, through their own website or other platform recognized by NEA. Operators should also report to NEA or its branches in relation to the status of the facilities, the delivery points, outstanding capacity and scheduled maintenance.
In October 2016, NDRC issued the Interim Provisions for Management Measures of Natural Gas Pipeline Transmission Prices and the Interim Provisions for Supervision and Review of Natural Gas Pipeline Transmission Cost. The provisions stipulate that (1) the pricing method shall follow the principle of “permitted cost plus reasonable income” and the method and procedures for determining and adjusting prices and the related core indexes such as permitted income rate and load rate are also defined; (2) it is required that independent accounting should be conducted in respect of the natural gas prices shalltransportation business with the related costs to be unified.
Pursuant to scheduled implementationcalculated separately, and the standards for determining the major indexes constituting costs are also defined; and (3) appropriate public disclosure of natural gas pricing reform, the NDRC released the Circular on Rationalizing the Price of Non-Residential Natural Gas (Fagai Jiage Circular 351[2015]) in February 2015 to unify stock gas and incremental gas prices. This circular will be implemented from April 2015.
cost related information is required.
Regulation of Refining and Marketing of Refined PetroleumOil Products
Gasoline and Diesel Prices
Gasoline and diesel prices are government-guided.
In March 2013, the NDRC released Circular on Establishment of Sound Price Formation Mechanism of Refined Oil Products (Fagai Jiage(NDRC Pricing Circular 624[2013]), which specified that a reformed refined oil product price formation mechanism shall include: shortening of the refined oil product price adjustment period to 10 working days; elimination of the 4% price fluctuation on international market as a prerequisite for price adjustment; adjustment of the composition of benchmarked crude oil as a reference for domestic oil product prices. To save social resources, if the assessed adjustment
34

in domestic refined oil product prices is less than RMB 50 per tonne, the adjustment will be postponed to next period. In cases of special conditions such as significant increase in domestic CPI, significant emergencies or significant fluctuations of crude oil price on international market which may trigger adjustment of domestic refined oil price, the NDRC may implement ad hoc suspension, delay or narrowing of price adjustment upon the approval by the State Council. Upon elimination of the special conditions, the price formation mechanism may resume operation after the NDRC obtains the State Council’s for approval.
Jet Fuels Price
DuringOn January 13, 2016, NDRC made further adjustments to the transition period,pricing mechanism for refined oil products, effective immediately. When benchmark crude oil price falls below US$ 40/bbl, NDRC will not further adjust oil product prices, the ex-factory priceunadjusted portion would be transferred into a risk fund, which can be used for energy conservation and emission reduction, refined oil product quality upgrading and security of the jet fuels (standard) will temporarily be determinedand gas supply upon approval by the buyers and the sellers, subject to a limit of no more than the CIF post-duty price in the Singapore market.
relevant departments.
On September 16, 2013, a Circular of Relevant Opinions on Pricing Policies for Upgrading Oil Product Quality (NDRC Pricing Circular 1845[2013]) was promulgated by the NDRC. The Circular provides that the prices of gasoline and diesel products shall be increased if the quality of such products is upgraded. For standard gasoline and diesel products that are upgraded to GB IV standards, their prices shall be raised by RMB 290 per tonne and RMB 370 per tonne, respectively; for gasoline and diesel products that are upgraded from GB IV to GB V standards, their price shall be raised by RMB 170 per tonne and RMB 160 per tonne, respectively. Prices for regular diesel shall be benchmarked against automobile diesel with same specification.
Jet Fuels Price
During the transition period, the ex-factory price of the jet fuels (standard) will temporarily be determined by the buyers and the sellers, subject to a limit of no more than the CIF post-duty price in the Singapore market.
Regulation of Crude Oil and Refined PetroleumOil Products Market
On December 4, 2006, Ministry of Commerce of the PRC promulgated the “Administrative Rules for Crude Oil Market” and “Administrative Rules for Refined PetroleumOil Products Market” to open the wholesale market of crude oil and refined petroleumoil products to new market entrants, respectively. The rapid entrance of foreign enterprises into Chinese petroleum, chemical and other related business will change the current horizon of crude oil resource, as well as petroleum and chemical products market.
35
Investment
Under the State Council’s Decision on Investment System Reform, investments without the use of government funds are only subject to a licensing system or a registration system, as the case may be. Under the current system, only significant projects and the projects of restrictive nature are subject to approval so as to maintain social and public interests, and all other projects of any investment scale are only subject to a registration system.
On October 31, 2014,In accordance with the State Council issued the CatalogueAdministrative Measures Approval and Record-filing of Overseas Investment Projects Requiring Government Approval (2014) (“2014 Catalogue”),(NDRC Decree No. 9) and the Decision of NDRC on December 27, 2014,Amending the NDRC issuedRelevant Clauses of the Administrative Measures for the Approval and FilingRecord-Filing of overseasOutbound Investment Projects according to which,and Administrative Measures for the Approval and Record-Filing of Foreign Investment Projects (NDRC Decree No. 20), overseas investment projects involving sensitive countries or regions or sensitive industries shall be approved by the NDRC, among which, those projects with the amount of Chinese investment over US$ 2 billion shall be subject to an examination opinion of the NDRC after being reported to the State Council for confirmation. All other projects, including those by enterprises directly administered by the SASAC and local enterprises with an investment size over US$3 billion, will require only a filing with the NDRC. According to the Administrative Measures for Overseas Investment which was issuedinvestments by the MOFCOM in September 2014 and implemented in October 2014, enterprise overseas investmentsChinese enterprises (other than financial enterprises) involving sensitive countries or regions or sensitive industries shall be submitted to MOFCOM for approval, and other overseas investments by Chinese enterprises will only need to submit a filing with MOFCOM or its regional branches.
In accordance with the Administrative Measures for Overseas Investments issued by MOFCOM, overseas investments involving sensitive countries (regions) and sensitive shall be approved by MOFCOM.  Investments by enterprises directly administered by the SASAC shall apply for MOFCOM’s approval or submitAll other investments swill require only a filing with the MOFCOM.
Pursuant to the Anti-Monopoly Law of the PRC which became effective on August 1, 2008, when market concentration by business carriers through merger, acquisition of control through shares or assets acquisition, or acquisition of control or the ability to exercise decisive influence over other business carriers by contract or by other means reaches a threshold of declaration level prescribed by the State Council, the business carriers shall declare in advance to the Anti-monopoly Law enforcement agency, otherwise, the business carriers shall not implement such market concentration.
The Notice of the National Energy Administration on Issuing the Measures for the Supervision and Administration of Fair Opening of Oil and Gas Pipelines Network Facilities (for Trial Implementation) (NEA No. 84 [2014]) requires that (i) oil and gas pipelines network facilities operating enterprises, in case of spare capacity of oil and gas pipelines network facilities, shall equally provide their pipeline network facilities to main third-party market players and provide transportation, storage, gasification, liquefaction, compression, and other services; (ii) the transportation (storage, gasification, etc.) prices determined by the pricing authorities in accordance with the relevant administrative provisions shall be implemented for the opening of oil and gas pipelines network facilities; (iii) oil and gas pipelines network facilities operating enterprises shall disclose the access standards, transportation (storage and gasification) prices, conditions for application for access, acceptance procedures, and other information on oil and gas pipelines network facilities on the websites or the information platforms designated by the National Energy Administration on a quarterly basis; and (iv) oil and gas pipeline network facilities operating enterprises shall submit the relevant status of oil and gas pipelines network facilities to the National Energy Administration or its dispatched offices semiannually.
Taxation, Fees and Royalty
Companies which operate petroleum and petrochemical businesses in China are subject to a variety of taxes, fees and royalties.
Effective from December 1, 2014, the rate of mineral resource compensation charges on crude oil and natural gas is reduced to zero, and the applicable resource tax rate is correspondingly increased from 5% to 6%.
35

Effective from January 1, 2015, the threshold of the special oil income levy is increased from US$55 to 65 per barrel, and a five-level progressive rate is applied to special oil income levy collection based on the sale prices.
From November 29, 2014 to January 12, 2015, the unit tax amount of consumption tax on gasoline, naphtha, solvent and lubricant have been adjusted three times and the current applicable consumption tax rates are set forth in the table below. For further information about consumption tax rates, see Note 6 to our consolidated financial statements.
Effective from May 1, 2016, business tax has been completed replaced by value-added tax to cover all the business sectors that used to fall under the business tax regime.
36
Applicable tax, fees and royalties on refined petroleumoil products and other refined oil products generally payable by us or by other companies in similar industries are shown below.
Tax Item
 
Tax Base
 
Tax Rate/Fee Rate
 
Enterprise income tax
 Taxable income 25% effective from January 1, 2008.
     
Value-added tax Revenue 13% for liquefied petroleum gas, natural gas, and low density polyethylene for production of agricultural film and fertilizers and 17% for other items. 6%, 11% and 17% for taxable services. We generally charge value-added tax to our customers at the time of settlement on top of the selling prices of our products on behalf of the taxation authority. We may directly claim refund from the value-added tax collected from our customers for value-added tax that we paid for (i) purchasing materials consumed during the production process; and (ii) charges paid for drilling and other engineering services.
     
Consumption tax Aggregate volume sold or self-consumed 
Effective from January 13, 2015, RMB 1.52 per liter for gasoline, naphtha, solvent and lubricant, and RMB 1.2 per liter for diesel, fuel oil and jet kerosene.
     
Import tariff CIF China price 5% for gasoline, 6% for diesel, 9% for jet kerosene and 6% for fuel oil. Beginning on July 1, 2011, the applicable tax rates for gasoline, fuel oil, diesel and jet kerosene are 1%, 1%, 0% and 0%, respectively.  Starting from 2014,In 2016,  the applicable tax rate for motor gasoline and aviation gasoline, No. 5-7 fuel oil and diesel is 1%. and 0% for jet kerosene and naphth.
     
Resource tax Aggregate volume sold or self-consumed Effective from December 1, 2014, for domestic production of crude oil and natural gas, the applicable tax rate is increased from 5% to 6% of the sales revenue, exemption or deduction may apply if qualified.
     
Compensatory fee for mineral resourcesResource compensation tax RevenueSales revenue of crude oil and natural gas StartingEffective from December 1, 2014, the applicable tax rate of compensatory fees for mineral resources on crude oil and natural gas is reduced from 1% to zero.
     
Exploration license fee Area RMB 100 to RMB 500 per square kilometer per annum.
     
Production license fee Area RMB 1,000 per square kilometer per annum.
     
Royalty fee(1)
 Production volume Progressive rate of 0-12.5% for crude oil and 0-3% for natural gas.
     
City construction tax Total amount of value-added tax, consumption tax and business tax 1%, 5% and 7%.
36
Education Surchargesurcharge and local education surcharge Total amount of value-added tax, consumption tax and business tax 3% for education surcharge and 2%. for local education surcharge.
     
Special Oil Income Levy Any revenue derived from sale of domestically produced crude oil when the realized crude oil price exceeds US$65 per barrel. Progressive rate of 20% to 40% for revenues derived from crude oil with realized price in excess of US$65 per barrel.
__________
37
(1)Sino-foreign oil and gas exploration and development cooperative projects whose contracts were signed prior to November 1, 2011 and have not yet expired are still subject to royalty fee, and the project companies of those cooperative projects are not subject to any other resource taxes or fees. Sino-foreign oil and gas exploration cooperative projects whose contracts are signed after November 1, 2011 are not subject to royalty fee, but are subject to resource taxes.
C.ORGANIZATIONAL STRUCTURE

C.          ORGANIZATIONAL STRUCTURE
For a description of our relationship with Sinopec Group Company, see “Item 4. Information on the Company ¾ A. History and Development of the Company” and “Item 7. Major Shareholders and Related Party Transactions.” For a description of our significant subsidiaries, see Note 3433 to our consolidated financial statements.
D.          PROPERTY, PLANT AND EQUIPMENT
D.PROPERTY, PLANT AND EQUIPMENT
We own substantially all of our properties, plants and equipment relating to our business activities. See “Item 4. Information on the Company ¾ B. Business Overview” for description of our property, plant and equipment.
Environmental Matters
We are subject to various national environmental laws and regulations and also environmental regulations promulgated by the local governments in whose jurisdictions we have operations. For example, national regulations promulgated by the central government set discharge standards for emissions into air and water. They also set forth schedules of discharge fees for various waste substances. These schedules usually provide for discharge fee increases for each incremental amount of discharge up to a certain level. Above a certain level, the centralPRC regulations permit the local government to order any of our facilities to cure certain behavior causing environmental damage and subject to the central government’s approval, the local government may also issue orders to close any of our facilities that fail to comply with the existing regulations. In addition, we have incurred capital expenditure specifically in compliance with the various environmental protection objectives set by the PRC government for the petroleum and chemical industry, to promote energy saving and environmental protection in China.
Our Energy Management and Environmental Protection Department is responsible for environmental management functions such as energy saving, emission reduction, environmental protection, water saving, comprehensive utilization of resources and clean production. Each of our production subsidiaries has implemented policies to control its pollutant emissions and discharge and to oversee compliance with the PRC environmental regulations. In January 2013, we integrated
Most of our environmental protection functions such as low-carbon development strategy and energy-saving mission by setting up a new department named Energy Management and Environmental Protection Department. The main functions of this new department are environmental management functions such as energy saving, emission reduction, environmental protection, water saving, comprehensive utilization of resources and clean production.
Our production facilities have their own environmental protection facilities, and the rest of our production facilities utilize available social resources, to treatguarantee the effective treatment of waste water, solid waste and waste gases, on site. Waste water first goes through preliminary treatment atto ensure the compliance with applicable emission standard for our ownemission of waste water treatment facilities. Thereafter, the water is sentand waste gas, and to nearby waste water treatment centers operated either by us or by Sinopec Groupfollow applicable disposal procedures for further treatment. Allour disposal of solid waste materials generated by our production facilities are buried at disposal sites or burned in furnaces either operated by us or by Sinopec Group. Waste gases are generally treated and burned in furnaces before dissipation and the ash is disposed in accordance with our solid waste disposal procedures.
waste.
Environmental regulations also require companies to file an environmental impact report to the environmental bureau for approval before undertaking any project with negative impact on the environment. The construction of a new production facility orsuch projects shall comply with any major expansion or renovation of an existing production facility. Such an undertakingenvironmental protection measures required by the environmental bureau. The projects will notonly be permitted to operate untilafter the environmental bureau has performed an inspection and is satisfied that environmentally sound equipment has been installed for the facility.
37

We believe our environmental protection systems and facilities are adequate for us to comply with current applicable national and local environmental protection regulations. The PRC government, however, may impose stricter regulations which require additional expenditure on compliance with environmental regulations.
Our environmental protection expenditures were approximately RMB 4.8 billion in 2012, RMB 5.2 billion in 2013, and RMB 5.4 billion in 2014.
2014, RMB 5.8 billion in 2015 and RMB 6.4 billion in 2016.
Insurance
In respect of our refining, petrochemical production, and marketing and sales operations, we currently maintain with Sinopec Group Company, under the terms of its Safety Production Insurance Fund (“SPI Fund”)(SPI Fund), approximately RMB 718.3779.4 billion of coverage on our property and plants and approximately RMB 122.998.5 billion of coverage on our inventory. In 2014,2016, we paid an insurance premium of approximately RMB 2.02.278 billion to Sinopec Group Company for such coverage.
38
 Transportation vehicles and products in transit are not covered by Sinopec Group Company and we maintain insurance policies for those assets with insurance companies in the PRC.
The insurance coverage under SPI Fund applies to all domestic enterprises controlled by Sinopec Group Company under regulations published by the Ministry of Finance. We believe that, in the event of a major accident, we will be able to recover most of our losses from insurance proceeds paid under the SPI Fund or by insurance companies.
Pursuant to an approval of the Ministry of Finance, Sinopec Group Company entered into an agreement with PICC Property and Casualty Company Limited on January 29, 2002 to purchase a property and casualty policy which would also cover our assets. The policy provides for an annual maximum cumulative claim amount of RMB 4.0 billion and a maximum of RMB 2.36 billion per occurrence.
In November 2013, our Donghuang II pipeline located in Qingdao Economic and Technological Development Zone ruptured, resulting in oil leakage into the covered municipal drainage trench. The municipal drainage trench exploded and caused severe casualties and injuries to the surrounding pedestrians, residents and rescue team. The accident caused 62 deaths and 136 injuries and a direct economic loss of RMB 751.7 million, according to the investigation report issued by the State Council investigation team. We have taken the responsibility for paying our portion of required compensation to third parties. Our payments would be funded mainly from our Safe Production Insurance Fund that have been accumulated in the past years, as well as claims under the business catastrophe insurance policy that we maintained with a third-party commercial insurance company.
ITEM 4A.
4A.		UNRESOLVED STAFF COMMENTS
None.

ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS
A.A.          GENERAL
The following discussion and analysis should be read in conjunction with our audited consolidated financial statements. Our consolidated financial statements have been prepared in accordance with IFRS. Certain financial information presented in this section is derived from our audited consolidated financial statements. Unless otherwise indicated, all financial data presented on a consolidated basis or by segment, are presented net of inter-segment transactions (i.e., inter-segment and other intercompany transactions have been eliminated).
Critical Accounting Policies
Our reported consolidated financial condition and consolidated results of operations are sensitive to accounting methods, assumptions and estimates that underlie the preparation of our financial statements. We base our assumptions and estimates on historical experience and on various other assumptions that we believe to be reasonable and which form the basis for making judgments about matters that are not readily apparent from other sources. On an on-going basis, our management evaluates its estimates. Actual results may differ from those estimates as facts, circumstances and conditions change.
The selection of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions and assumptions are factors to be considered when reviewing our financial statements. Our principal accounting policies are set forth in Note 2 to the consolidated financial
38

statements. We believe the following critical accounting policies involve the most significant judgments and estimates used in the preparation of our financial statements.
Oil and gas properties and reserves
The accounting for our upstream oil and gas activities is subject to special accounting rules that are unique to the oil and gas business. There are two methods to account for oil and gas business activities, the successful efforts method and the full cost method. We have elected to use the successful efforts method.
The successful efforts method reflects the volatility that is inherent in exploring for mineral resources in that costs of unsuccessful exploratory efforts are charged to expense as they are incurred. These costs primarily include dry hole costs, seismic costs and other exploratory costs. Under the full cost method, these costs are capitalized and written-off (depreciation) over time.
Engineering estimates of our oil and gas reserves are inherently imprecise and represent only approximate amounts because of the subjective judgments involved in developing such information. There are authoritative guidelines regarding the engineering criteria that have to be met before estimated oil and gas reserves can be designated as “proved”. Proved and proved developed reserves estimates are updated at least annually and take into account recent production and technical information about each field. In addition, as prices and cost levels change from year to year, the estimate of proved and proved developed reserves also changes. If the estimated proved reserves is adjusted downward, the change in depreciation expense or write-down of book value of oil and gas properties will have impact on our profit. This change is considered a change in estimate for accounting purposes and is reflected on a prospective basis in related depreciation rates.
39
Future dismantlement costs for oil and gas properties are estimated with reference to engineering estimates after taking into consideration the anticipated method of dismantlement required in accordance with industry practices in similar geographic area, including estimation of economic life of oil and gas properties, technology and price level. The present values of these estimated future dismantlement costs are capitalized as oil and gas properties with equivalent amounts recognized as provision for dismantlement costs.
Despite the inherent imprecision in these engineering estimates, these estimates are used in determining depreciation expense, impairment expense and future dismantlement costs, and in disclosing the supplemental standardized measure of discounted future net cash flows relating to proved oil and gas properties. Depreciation rates are determined based on estimated proved developed reserve quantities (the denominator) and capitalized costs of producing properties (the numerator). Producing properties’ capitalized costs are amortized based on the units of oil or gas produced. Therefore, assuming all other variables are held constant, an increase in estimated proved developed reserves decreases our depreciation, depletion and amortization expense. Also, estimated reserves are often used to calculate future cash flows from our oil and gas operations, which serve as an indicator of fair value in determining whether a property is impaired or not. The larger the estimated reserves, the less likely the property is impaired.  There have been no significant changes to the original reserve estimates during any of the three years ended December 31, 2012, 2013 and 2014.
Impairment for long-lived assets
If circumstances indicate that the net book value of a long-lived asset, including oil and gas properties, may not be recoverable, the asset may be considered “impaired”, and an impairment loss may be recognized. The carrying amounts of long-lived assets are reviewed periodically in order to assess whether the recoverable amounts have declined below the carrying amounts. For goodwill, the recoverable amount is estimated annually. These assets are tested for impairment whenever events or changes in circumstances indicate that their recorded carrying amounts may not be recoverable. When such a decline has occurred, the carrying amount is reduced to recoverable amount. The recoverable amount is the greater of the net selling price and the value in use. It is difficult to precisely estimate selling price because quoted market prices for our assets or cash-generating units are not readily available. In determining the value in use, expected cash flows generated by the asset or the cash-generating unit are discounted to their present value, which requires significant judgment relating to level of sales volume, selling price and amount of operating costs. We use all readily available information in determining an amount that is a reasonable approximation of recoverable amount, including estimates based on reasonable and supportable assumptions and projections of reserve quantities, sales volume, selling price and amount of operating costs.
Impairment losses recognized for each of the three years ended December 31, 2012, 20132014, 2015 and 20142016 in our statement of income on long-lived assets are summarized as follows:
  Year ended December 31, 
  2014  2015  2016 
  (RMB in millions) 
Exploration and production  2,436   4,864   11,605*
Refining  29   9   1,655 
Marketing and distribution  40   19   267 
Chemicals  1,106   142   2,898 
Corporate and others  8   112   - 
Total  3,619   5,146   16,425 
* Information relating to the detailed analysis of the change in impairment losses is presented in Note 7 to the consolidated financial statements.
39
  
Year ended December 31,
 
  
2012
  
2013
  
2014
 
  (RMB in millions) 
Exploration and production  1,006   2,523   2,436 
Refining  -   88   29 
Marketing and distribution  8   35   40 
Chemicals  -   -   1,106 
Corporate and others  -   15   8 
Total  1,014   2,661   3,619 
             

Depreciation
Property, plant and equipment (other than oil and gas properties) are depreciated on a straight-line basis over the estimated useful lives of the assets, after taking into account the estimated residual value. We review the estimated useful lives of the assets regularly in order to determine the amount of depreciation expense to be recorded during any reporting period. The useful lives are based on our historical experience with similar assets and take into account anticipated technological changes. The depreciation expense for future periods is adjusted if there are significant changes from previous estimates. There have been no changes to the estimated useful lives and residual values during each of the three years ended December 31, 2012, 20132014, 2015 and 2014.2016.
40
Impairment of accounts receivable for bad and doubtful debts
We estimate impairment of accounts receivable for bad and doubtful debts resulting from the inability of our customers to make the required payments. We base our estimates on the aging of our accounts receivable balance, customer credit-worthiness, and historical write-off experience. If the financial condition of our customers were to deteriorate, actual write-offs would be higher than estimated. The changes in the impairment losses for bad and doubtful accounts are as follows:
  Year ended December 31, 
  2014  2015  2016 
  (RMB in millions) 
Balance as of January 1  574   530   525 
Impairment losses recognized for the year .  44   40   238 
Reversal of impairment losses            (15)  (13)  (8)
Written off            (57)  (38)  (72)
Others            (16)  6   - 
Balance as of December 31            530   525   683 
  
Year ended December 31,
 
  
2012
  
2013
  
2014
 
  (RMB in millions) 
Balance as of January 1  1,012   699   574 
Impairment losses recognized for the year  44   36   44 
Reversal of impairment losses  (155)  (38)  (15)
Written off   (202)  (123)  (57)
Others  -   -   (16)
Balance as of December 31  699   574   530 
             

Allowance for diminution in value of inventories
If the costs of inventories become higher than their net realizable values, an allowance for diminution in value of inventories is recognized. Net realizable value represents the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale. We base the estimates on all available information, including the current market prices of the finished goods and raw materials, and historical operating costs. If the actual selling prices were to be lower or the costs of completion were to be higher than estimated, the actual allowance for diminution in value of inventories could be higher than estimated. Allowance for diminution in value of inventories is analyzed as follows:
  
Year ended December 31,
 
  
2012
  
2013
  
2014
 
  (RMB in millions) 
Balance as of January 1  1,382   491   1,751 
Allowance for the year      7,419   1,453   3,327 
Reversal of allowance on disposal  (378)  (1)  (136)
Written off  (7,943)  (192)  (1,327)
Others  11   -   (12)
Balance as of December 31  491   1,751   3,603 
             
40
  Year ended December 31, 
  2014  2015  2016 
  (RMB in millions) 
Balance as of January 1            1,751   3,603   4,402 
Allowance for the year            3,327   3,687   430 
Reversal of allowance on disposal            (136)  (34)  (10)
Written off            (1,327)  (2,931)  (4,021)
Others            (12)  77   119 
Balance as of December 31            3,603   4,402   920 

Recently Pronounced International Financial Reporting Standards
Information relating to the recently pronounced IFRS is presented in Note 1 to the consolidated financial statements.
Overview of Our Operations
We are the largest integrated petroleum and petrochemical company in China and one of the largest in Asia in terms of operating revenues. We engage in exploring for, developing and producing crude oil and natural gas, operating refineries and petrochemical facilities and marketing crude oil, natural gas, refined petroleumoil products and petrochemicals.petrochemical products. We have reported our consolidated financial results according to the following four principal business segments and the corporate and others segment.
·
Exploration and Production Segment, which consists of our activities related to exploring for and developing, producing and selling crude oil and natural gas;
41
·
Refining Segment, which consists of purchasing crude oil from our exploration and production segment and from third parties, processing of crude oil into refined petroleumoil products, selling refined petroleumoil products principally to our marketing and distribution segment;
·
Marketing and Distribution Segment, which consists of purchasing refined petroleumoil products from our refining segment and third parties, and marketing, selling and distributing refined petroleumoil products by wholesale to large customers and independent distributors and retail through our retail network;
·
Chemicals Segment, which consists of purchasing chemical feedstock principally from the refining segment and producing, marketing, selling and distributing chemical products; and
·
Corporate and Others Segment, which consists principally of trading activities of the import and export subsidiaries and our research and development activities.
B.          CONSOLIDATED RESULTS OF OPERATIONS
Year Ended December 31, 20142016 Compared with Year Ended December 31, 2013
2015
In 2014,2016, our total operating revenues were RMB 2,825.91,930.9 billion, representing a decrease of 1.9%4.4% over 2013.2015. Our operating income was RMB 73.577.2 billion, representing a decreasean increase of 24.1%35.9% over 2013.
2015.
The following table sets forth major revenue and expense items in the consolidated statement of income for the years ended December 31, 20132015 and 2014.2016.
  
Year Ended December 31,
  Change from 2013 to 
  
2014
  
2013
  2014 
  (RMB in millions)  % 
Operating revenues   2,825,914   2,880,311   (1.9)
Sales of goods  2,781,641   2,833,247   (1.8)
Other operating revenues  44,273   47,064   (5.9)
Operating expenses  (2,752,427)  (2,783,526)  (1.1)
Purchased crude oil, products and operating supplies and expenses  (2,334,399)  (2,371,858)  (1.6)
Selling, general and administrative expenses  (68,374)  (69,928)  (2.2)
Depreciation, depletion and amortization  (90,097)  (81,265)  10.9 
Exploration expenses, including dry holes  (10,969)  (12,573)  (12.8)
Personnel expenses  (57,233)  (55,353)  3.4 
Taxes other than income tax  (191,202)  (190,672)  0.3 
Other operating (expenses)/income, net  (153)  (1,877)  (91.8)
Operating income  73,487   96,785   (24.1)
Net finance costs  (14,229)  (4,246)  235.1 
Investment income and income from associates and jointly controlled entities  6,246   2,513   148.5 
Earnings before income tax  65,504   95,052   (31.1)
Tax expense  (17,571)  (24,763)  (29.0)
Net income  47,933   70,289   (31.8)
Attributable to:            
Equity shareholders of the Company  46,466   66,132   (29.7)
Non-controlling interests  1,467   4,157   (64.7)
             
41
  Year Ended December 31,   
  2015  2016  
Change from
2015 to 2016
 
  (RMB in millions)  (%) 
Operating revenues  2,020,375   1,930,911   (4.4)
Sales of goods            1,977,877   1,880,190   (4.9)
Other operating revenues            42,498   50,721   19.3 
Operating expenses  (1,963,553)  (1,853,718)  (5.6)
Purchased crude oil, products and operating supplies and expenses          
  (1,494,046)  (1,379,691)  (7.7)
Selling, general and administrative expenses  (69,491)  (64,360)  (7.4)
Depreciation, depletion and amortization  (96,460)  (108,425)  12.4 
Exploration expenses, including dry holes  (10,459)  (11,035)  5.5 
Personnel expenses            (56,619)  (63,887)  12.8 
Taxes other than income tax            (236,349)  (232,006)  (1.8)
Other operating (expenses)/income, net  (129)  5,686   (4,507.8)
Operating income            56,822   77,193   35.9 
Net finance costs            (9,239)  (6,611)  (28.4)
Investment income and income from associates and jointly controlled entities  8,828   9,569   8.4 
Earnings before income tax            56,411   80,151   42.1 
Tax expense            (12,613)  (20,707)  64.2 
Net income            43,798   59,444   35.7 
Attributable to:         　　　 
Equity shareholders of the Company            32,512   46,672   43.6 
Non-controlling interests            11,286   12,772   13.2 

Operating revenues
In 2014,2016, our sales of goods were RMB 2,781.61,880.2 billion, representing a decrease of 1.8%4.9% over 2013.2015. This was mainly attributable to the price decline of crude oil and petroleumpetrochemical products.
The following table sets forth our external sales volume, average realized prices and the respective rates of change from 20132015 to 20142016 for our major products:
  Sales Volume  Change from 2013 to 2014  
Average Realized Price
  Change from 2013 to 2014 
  
2014
  
2013
    
2014
  
2013
   
  (thousand tonnes)  (%)  (RMB per tonne)  (%) 
                   
Crude oil  8,864   7,604   16.6   4,008   4,253   (5.8)
Domestic  8,780   7,582   15.8   4,001   4,252   (5.9)
Oversea  84   22   281.8   4,691   4,678   0.3 
Natural gas  16,661   15,907(1)  4.7   1,589   1,336(2)  18.9 
Gasoline  64,083   59,482   7.7   8,339   8,498   (1.9)
Diesel  102,724   99,855   2.9   6,647   7,050   (5.7)
Kerosene  21,845   20,162   8.3   5,710   6,116   (6.6)
Basic chemical feedstock  27,277   25,838   5.6   6,151   6,870   (10.5)
Synthetic fiber monomer and polymer  6,479   6,856   (5.5)  7,223   8,167   (11.6)
Synthetic resin  11,584   10,696   8.3   9,684   9,631   0.6 
Synthetic fiber  1,430   1,488   (3.9)  9,436   10,356   (8.9)
Synthetic rubber  1,205   1,346   (10.5)  10,554   12,214   (13.6)
Chemical fertilizer  598   1,129   (47.0)  1,686   1,698   (0.7)
42
____________

  Sales Volume    Average Realized Price   
  2015  2016  
Change from
2015 to 2016
  2015  2016  
Change from
2015 to 2016
 
  (thousand tonnes)  (%)  (RMB per tonne)  (%) 
Crude oil            9,674   6,808   (29.6)  2,019   1,628   (19.4)
Domestic            9,674   6,808   (29.6)  2,019   1,628   (19.4)
Natural gas            18,440
(1) 
  19,008
(1) 
  3.1   1,519
(2) 
  1,258
(2) 
  (17.2)
Gasoline            69,749   77,480   11.1   6,749   6,386   (5.4)
Diesel            95,472   91,492   (4.2)  4,937   4,482   (9.2)
Kerosene            23,028   25,164   9.3   3,387   2,807   (17.1)
Basic chemical feedstock  29,608   32,248   8.9   4,175   4,054   (2.9)
Synthetic fiber monomer and polymer  6,071   7,146   17.7   5,796   5,325   (8.1)
Synthetic resin            11,989   12,223   2.0   7,771   7,488   (3.6)
Synthetic fiber            1,380   1,369   (0.8)  7,740   7,113   (8.1)
Synthetic rubber            1,104   1,098   (0.5)  8,778   9,608   9.5 
Chemical Fertilizer            243   714   193.8   1,823   1,612   (11.6)

(1)million cubic meters
(2)RMB per thousand cubic meters


Sales of crude oil and natural gas
Most of crude oil and a portion of natural gas we produced were used internally for refining and chemical production and the remaining were sold to otherexternal customers. In 2014,2016, the total revenue from crude oil, natural gas and other upstream products that were sold externally amounted to RMB 69.647.4 billion, representing an increasea decrease of 14.3%17.8% over 2013.2015. The change was mainly due to the increase in theprice and sales volume decline of crude oil and the sale volume and price of natural gas in 2014.
2016.
Sales of refined petroleum products
In 2014,2016, our refining segment and marketing and distribution segment sell petroleum products (mainly consisting of gasoline, diesel and kerosene which are referred to as the refined oil products and other refined petroleum products) to external parties. The external sales revenue realized by these two segments were RMB 1,633.91,130.4 billion, accounting for 58.7%58.5% of our operating revenues and representing a decrease of 2.8%6.3% over 2013.2015. The decrease was mainly because of the decline in prices and sales volumes of various petroleum products, which offset the increase in sales volumes of gasoline, diesel and kerosene.refined petrochemical products. The sales revenue of gasoline, diesel and kerosene was RMB 1,342.0975.6 billion, accounting for 82.1%86.3% of the total revenue of other refined petroleum products and representing an increasea decrease of 0.7%4.4% over 2013. Sales2015. The sales revenue of other refined petroleum products was RMB 291.9154.8 billion, accounting for 17.9%13.7% of the total revenue of petroleum products and representing a decrease of 16.0%17.0% over 2013.
42

2015.
Sales of chemical products
Our external sales revenue of chemical products was RMB 357.0284.3 billion, accounting for 12.8%14.7% of our operating revenues and representing an increase of 2.8% over 2015. This was mainly attributable to the increase in sales volume of chemical products.
Revenue from corporate and others
In 2016, our corporate and others realized sales revenue of RMB 418.1 billion, accounting for 21.7% of our operating revenue and representing a decrease of 4.6%4.3% over 2013.2015. This was mainly attributable to the price decline of chemical product which offset the sales volume increase of basic chemical feedstockcrude oil and synthetic resin.
Revenue from corporate and others
In 2014, our corporate and others realized sales revenue of RMB 721.2 billion, accounting for 25.9% of our operating revenue and representing a slight increase of 0.5% over 2013.
petrochemical products.
Operating expenses
In 2014,2016, our operating expenses were RMB 2,752.41,853.7 billion, representing a decrease of 1.1%5.6% over 2013,2015, among which:
Purchased crude oil, products and operating supplies and expenses were RMB 2,334.41,379.7 billion, representing a decrease of 1.6%7.7% over 2013,2015, accounting for 84.8%74.4% of the total operating expenses, of which:
·crude oil purchase expenses were RMB 837.4373.7 billion, representing a decrease of 4.2%20.4% over 2013.2015. In 2014,2016, the total throughput of crude oil that was purchased externally was 177.29202.40 million tonnes (excluding the amount processed for third parties), representing a decrease of 0.6% over 2013; the average unit processing cost for crude oil purchased externally was RMB 4,724 per tonne, representing a decrease of 3.6% over 2013; and
43
(excluding the amount processed for third parties), representing a decrease of 1.9% over 2015; the average unit processing cost for crude oil purchased externally was RMB 2,084 per tonne, representing a decrease of 19.6% over 2015; and
·other purchasing expenses were RMB 1,497.01,006.0 billion, remaining consistent with thatrepresenting a decrease of 2013.1.8% over 2015. This was mainly due to the price decline of feedstock purchased from external sources.
Selling, general and administrative expenses totaled RMB 68.464.4 billion, representing a decrease of 2.2%7.4% over 2013.2015. This was mainly attributable to the reform of our employment system and continued efforts in cost control.
Depreciation, depletion and amortization was RMB 90.1108.4 billion, representing an increase of 10.9%12.4% over 2013.2015. This was mainly due to the decrease of oil and gas reserves and the increase in depreciation and depletion rate as a result of expenditure on fixed assets.the oil price decline.
Exploration expenses, including dry holes were RMB 11.0 billion, representing a decreasean increase of 12.8%5.5% over 2013, reflecting our optimization2015. This was mainly attributable to that fact that the Company maintained its level of exploration investment, which improve the exploration efficiency and reduce exploration costs.activities in low oil price environment.
Personnel expenses were RMB 57.263.9 billion, representing an increase of 3.4%12.8% over 2013.2015. This was mainly attributable to the reform of our employment system in 2016.
Taxes other than income tax were RMB 191.2232.0 billion, representing a decrease of 1.8% over 2015. This was mainly attributable to the consumption tax decreased by RMB 4.9 billion as a result of decline of diesel production volume and the resources tax decreased by RMB 1.0 billion as a result of oil price decline.
Other operating (expenses)/income, net were RMB 5.7 billion, decreased by RMB 5.8 billion, mainly attributable to the increase of non-operating income as a result of the disposal of Sichuan-to-East China gas pipeline assets as well as the increase of asset impairment.
Operating income
In 2016, our operating income was RMB 77.2 billion, representing an increase of 0.3%35.9% over 2013.2015. This was mainly dueattributable to an increasethe utilization of RMB 3.4 billion in consumption tax resulting fromour integration advantage, particularly offsetting the increasenegative impact of low oil price by the consumption tax rateprofitability of petroleum products as compared with 2013, an increase of RMB 0.6 billion in city construction tax and education surcharge, and a decrease in special oil income levy by RMB 3.4 billion resulting from the decreased oil price.
Other operating expenses, net were RMB 0.2 billion.
Operating income
In 2014, our operating income was RMB 73.5  billion, representing a decrease of 24.1% over 2013.
downstream business.
Net finance costs
In 2014,2016, our net finance costs were RMB 14.26.6 billion, representing an increasea decrease of 235.1%28.4% over 2013.2015. This increasedecrease in finance costs was mainly attributable to (i) the net interest expenses increased by RMB 1.1 billion as a result of replacing US dollar loans with RMB loans (including replacing US dollar loans and compressing risk exposures of US dollar); (ii) foreign exchange loss of RMB 9.40.6 billion, representing an increase ofdecreased by RMB 0.43.2 billion over 2013; (ii) decrease in net foreign exchange gain ofas compared with 2015; (iii) interest income increased by RMB 2.90.2 billion due to the slowdown of Renminbi appreciation in 2014; and (iii) increase of RMB 6.6 billion in the losses arising from the change in fair value of our issued convertible bonds.
43

monetary reserve.
Earnings before income tax
In 2014,2016, our earnings before income tax were RMB 65.580.2 billion, representing a decreasean increase of 31.1%42.1% over 2013.
2015.
Tax expense
In 2014,2016, we recognized income tax expense of RMB 17.620.7 billion, representing an increase of 64.2% over 2015. That was mainly due to a decreasesubstantial increase in profit over the same period of RMB 7.2 billion over 2013.
2015. Detailed analysis of reconciliation between actual income tax expense and the expected income tax expense at applicable tax rate is presented in Note 9 to the consolidated financial statements.
Net income attributable to non-controlling interests
In 2014,2016, our net income attributable to non-controlling interests was RMB 12.8 billion, representing an increase of RMB 1.5 billion representing a decrease of RMB 2.7 billion over 2013.2015.
44
Net income attributable to equity shareholders of the Company
In 2014,2016, our net income attributable to our equity shareholders was RMB 46.546.7 billion, representing a decreasean increase of 29.7%43.6% over 2013.
2015.
Year Ended December 31, 20132015 Compared with Year Ended December 31, 2012
2014
In 2013,2015, our total operating revenues were RMB 2,880.32,020.4 billion, representing an increasea decrease of 3.4%28.5% over 2012.2014. Our operating income was RMB 96.856.8 billion, representing a decrease of 1.9%22.6% over 2012.
2014.
The following table sets forth major revenue and expense items in the consolidated statement of income for the years ended December 31, 20122014 and 2013.2015.
  Year Ended December 31,   
  2014  2015  
Change from
2014 to 2015
 
  (RMB in millions)  (%) 
Operating revenues  2,827,566   2,020,375   (28.5)
Sales of goods            2,783,265   1,977,877   (28.9)
Other operating revenues            44,301   42,498   (4.1)
Operating expenses  (2,754,127)  (1,963,553)  (28.7)
Purchased crude oil, products and operating supplies and expenses          
  (2,335,530)  (1,494,046)  (36.0)
Selling, general and administrative expenses  (68,543)  (69,491)  1.4 
Depreciation, depletion and amortization  (90,196)  (96,460)  6.9 
Exploration expenses, including dry holes  (10,969)  (10,459)  (4.6)
Personnel expenses            (57,525)  (56,619)  (1.6)
Taxes other than income tax            (191,208)  (236,349)  23.6 
Other operating (expenses)/income, net  (156)  (129)  (17.3)
Operating income            73,439   56,822   (22.6)
Net finance costs            (14,190)  (9,239)  (34.9)
Investment income and income from associates and jointly controlled entities  6,569   8,828   34.4 
Earnings before income tax            65,818   56,411   (14.3)
Tax expense            (17,571)  (12,613)  (28.2)
Net income            48,247   43,798   (9.2)
Attributable to:         　 
Equity shareholders of the Company            46,639   32,512   (30.3)
Non-controlling interests            1,608   11,286   601.9 
  Year Ended December 31,  
Change from 2012 to 2013
 
  
2013
  
2012
   
  (RMB in millions)  % 
Operating revenues  2,880,311   2,786,045   3.4 
Sales of goods  2,833,247   2,733,618   3.6 
Other operating revenues  47,064   52,427   (10.2)
Operating expenses  (2,783,526)  (2,687,383)  3.6 
Purchased crude oil, products and operating supplies and expenses  (2,371,858)  (2,301,199)  3.1 
Selling, general and administrative expenses  (69,928)  (61,174)  14.3 
Depreciation, depletion and amortization  (81,265)  (70,456)  15.3 
Exploration expenses, including dry holes  (12,573)  (15,533)  (19.1)
Personnel expenses  (55,353)  (51,767)  6.9 
Taxes other than income tax  (190,672)  (188,483)  1.2 
Other operating (expenses)/income, net  (1,877)  1,229   - 
Operating income  96,785   98,662   (1.9)
Net finance costs  (4,246)  (9,881)  (57.0)
Investment income and income from associates and jointly controlled entities  2,513   1,861   35.0 
Earnings before income tax  95,052   90,642   4.9 
Tax expense  (24,763)  (23,846)  3.8 
Net income  70,289   66,796   5.2 
Attributable to:            
Equity shareholders of the Company  66,132   63,879   3.5 
Non-controlling interests  4,157   2,917   42.5 
             

Operating revenues
In 2013,2015, our sales of goods were RMB 2,833.21,977.9 billion, representing an increasea decrease of 3.6%28.9% over 2012.2014. This was mainly dueattributable to the active explorationprice decline of marketscrude oil and increased trade income.
44

petrochemical products.
The following table sets forth our external sales volume, average realized prices and the respective rates of change from 20122014 to 20132015 for our major products:
  Sales Volume    Average Realized Price   
  2014  2015  
Change from
2014 to 2015
  2014  2015  
Change from
2014 to 2015
 
  (thousand tonnes)  (%)  (RMB per tonne)  (%) 
Crude oil            8,864   9,674   9.1   4,008   2,019   (49.6)
Domestic            8,780   9,674   10.2   4,001   2,019   (49.5)
Oversea            84   -   -   4,691   -   - 
Natural gas            16,661
(1) 
  18,440
(1) 
  10.7   1,589
(2) 
  1,519
(2) 
  (4.4)
Gasoline            64,083   69,749   8.8   8,339   6,749   (19.1)
Diesel            102,724   95,472   (7.1)  6,647   4,937   (25.7)
Kerosene            21,845   23,028   5.4   5,710   3,387   (40.7)
Basic chemical feedstock  27,277   29,608   8.5   6,151   4,175   (32.1)
Synthetic fiber monomer and polymer  6,479   6,071   (6.3)  7,223   5,796   (19.8)

  Sales Volume  Change from
2012 to 2013
  Average Realized Price  Change from
2012 to 2013
 
  
2013
  
2012
    
2013
  
2012
   
  (thousand tonnes)  (%)  (RMB per tonne)  (%) 
                   
Crude oil  7,604   6,221   22.2   4,253   4,579   (7.1)
Natural gas  15,907(1)  14,431(1)  10.2   1,336(2)  1,281(2)  4.3 
Gasoline  59,482   53,488   11.2   8,498   8,615   (1.4)
Diesel  99,855   99,864   0.0   7,050   7,219   (2.3)
Kerosene  20,162   18,760   7.5   6,116   6,416   (4.7)
Basic chemical feedstock  25,838   23,387   10.5   6,870   6,740   1.9 
Synthetic fiber monomer and polymer  6,856   6,943   (1.3)  8,167   8,238   (0.9)
Synthetic resin  10,696   10,503   1.8   9,631   9,181   4.9 
Synthetic fiber  1,488   1,458   2.1   10,356   10,790   (4.0)
Synthetic rubber  1,346   1,287   4.6   12,214   17,564   (30.5)
Chemical fertilizer  1,129   1,193   (5.4)  1,698   2,052   (17.3)
____________45

  Sales Volume    Average Realized Price   
  2014  2015  
Change from
2014 to 2015
  2014  2015  
Change from
2014 to 2015
 
  (thousand tonnes)  (%)  (RMB per tonne)  (%) 
Synthetic resin            11,584   11,989   3.5   9,684   7,771   (19.8)
Synthetic fiber            1,430   1,380   (3.5)  9,436   7,740   (18.0)
Synthetic rubber            1,205   1,104   (8.4)  10,554   8,778   (16.8)
Chemcial Fertilizer            598   243   (59.4)  1,686   1,823   8.1 

(1)million cubic meters
(2)RMB per thousand cubic meters

Sales of crude oil and natural gas
Most of crude oil and a portion of natural gas we produced internally were used internally for refining and chemical production and the remaining were sold to other customers. In 2013,2015, the total revenue from crude oil, natural gas and other upstream products that were sold externally amounted to RMB 60.857.7 billion, representing an increasea decrease of 13.2%17.0% over 2012, and accounted for 2.1% of our operating revenues.2014. The change was mainly due to the increase in the sales volumeprice decline of crude oil and the sale volume and price of natural gas.
in 2015.
Sales of refined petroleumoil products
In 2013,2015, our refining segment and marketing and distribution segment sell petroleum products (mainly consisting of gasoline, diesel and kerosene which are referred to as the refined oil products and other refined petroleumoil products) to external parties. The external sales revenue realized by these two segments were RMB 1,680.51,206.7 billion, accounting for 59.3%59.8% of our operating revenues and representing an increasea decrease of 2.0%26.1% over 2012.2014. The increasedecrease was mainly because of the increasedecline in prices of sales volume and prices for thesevarious refined petrochemical products. The sales revenue of gasoline, diesel and kerosene was RMB 1,332.81,020.2 billion, accounting for 79.3%84.5% of the total revenue of other refined petroleum products and representing a decrease of 24.0% over 2014. Sales revenue of other refined oil products was RMB 186.5 billion, accounting for 15.5% of the total revenue of petroleum products and representing an increasea decrease of 2.4%36.1% over 2012. Sales revenue of other refined petroleum products was RMB 347.7 billion, accounting for 20.7% of the total revenue of petroleum products and representing an increase of 0.8% over 2012.
2014.
Sales of chemical products
Our external sales revenue of chemical products was RMB 374.1275.2 billion, accounting for 13.2%13.6% of our operating revenues and representing an increasea decrease of 5.0%22.9% over 2012.2014. This was mainly attributable to expanded sales volumethe price decline of our main chemical products.
Revenue from corporate and others
In 2013,2015, our corporate and others realized sales revenue of RMB 717.8436.7 billion, accounting for 25.3%21.6% of our operating revenue and representing an increasea decrease of 6.1%39.4% over 2012.2014. This was mainly attributable to expanded sales volume, imports and exportsthe price decline of crude oil and refined petroleumpetrochemical products.
Operating expenses
In 2013,2015, our operating expenses were RMB 2,783.51,963.6 billion, representing an increasea decrease of 3.6%28.7% over 2012,2014, among which:
45

Purchased crude oil, products and operating supplies and expenses were RMB 2,371.91,494.0 billion, representing an increasea decrease of 3.1%36.0% over 2012,2014, accounting for 85.2%76.1% of the total operating expenses, of which:
·crude oil purchase expenses were RMB 874.3469.4 billion, representing a decrease of 0.7%44.0% over 2012.2014. In 2013,2015, the total throughput of crude oil that was purchased externally was 178.43176.29 million tonnes (excluding the amount processed for third parties), representing an increasea decrease of 5.8%0.6% over 2012;2014; the average unit processing cost for crude oil purchased externally was RMB 4,9002,663 per tonne, representing a decrease of 6.2%43.6% over 2012;2014; and
·other purchasing expenses were RMB 1,497.61,023.5 billion, representing an increasea decrease of 5.4%31.6% over 2012.2014. This was mainly due to the expansionprice decline of our trading activities.feedstock purchased from external sources.
46
Selling, general and administrative expenses totaled RMB 69.969.5 billion, representing an increase of 14.3%1.4% over 2012. This was mainly attributable to an increase of RMB 6.7 billion in rent for land, community service and other expenses.2014.
Depreciation, depletion and amortization was RMB 81.396.5 billion, representing an increase of 15.3%6.9% over 2012.2014. This was mainly due to the increase of depreciation resulting from our continuous capital expenditure on property, plant and equipment.continued investment in fixed assets.
Exploration expenses, including dry holes were RMB 12.610.5 billion, representing a decrease of 19.1%4.6% over 2012,2014, reflecting our enhancedoptimization of exploration activities, which improve theinvestment and effective reduction of exploration efficiency and reduce exploration costs.expenses.
Personnel expenses were RMB 55.456.6 billion, representing an increasea decrease of RMB 3.6 billion, or 6.9%,1.6% over 2012.2014.
Taxes other than income tax were RMB 190.7236.3 billion, representing an increase of 1.2%23.6% over 2012. This was mainly2014. Although the special oil income levy and resources tax decreased by RMB 24.6 billion over the same period of 2014 due to an increase of RMB 4.3 billion incrude oil price drop, the consumption tax resulting from the increased sales volumeby RMB 62.0 billion as a result of gasoline as compared with 2012, an increase of RMB 1.5 billion inincreased consumption tax rate, and city construction tax and educationeducational surcharge and a decrease in special oil income levyincreased by RMB 3.87.9 billion resulting fromaccordingly over the decreased oil price.same period of 2014.
Other operating expenses, net were RMB 1.90.1 billion.
Operating income
In 2013,2015, our operating income was RMB 96.856.8 billion, representing a decrease of 1.9%22.6% over 2012.
2014.
Net finance costs
In 2013,2015, our net finance costs were RMB 4.29.2 billion, representing a decrease of 57.0%34.9% over 2012.2014. This decrease in finance costs was mainly attributable to (i) decrease inthe net interest expenses of RMB 0.9 billion;5.1 billion, representing a decrease of RMB 4.3 billion over 2014; (ii) increase in net losses from foreign exchange gain ofincreased by RMB 2.6 billion;3.7 billion as compared with 2014 due to the RMB exchange rate fluctuation in 2015; and (iii) increase of RMB 2.1 billion in the earnings arisingloss from the change in fair value of our issued convertible bonds.bonds that decreased RMB 4.4 billion.
Investment income and income from associates and jointly controlled entities
The investment income and income from associates and jointly controlled entities in 2015 was RMB 8.8 billion, representing an increase of RMB 2.3 billion over 2014, which was mainly due to improved operating results of our affiliates in refining and chemicals industry.
Earnings before income tax
In 2013,2015, our earnings before income tax were RMB 95.156.4 billion, representing an increasea decrease of 4.9%14.3% over 2012.
2014.
Tax expense
In 2013,2015, we recognized income tax expense of RMB 24.812.6 billion, representing an increasea decrease of RMB 0.95.0 billion over 2012.
2014.
Net income attributable to non-controlling interests
In 2013,2015, our net income attributable to non-controlling interests was RMB 4.211.3 billion, representing an increase of RMB 1.29.7 billion over 2012.
46

2014. This was mainly due to the restructuring of Sinopec Marketing Co., Ltd.
Net income attributable to equity shareholders of the Company
In 2013,2015, our net income attributable to our equity shareholders was RMB 66.132.5 billion, representing an increasea decrease of 3.5%30.3% over 2012.2014.
C.C.          DISCUSSIONS ON RESULTS OF SEGMENT OPERATIONS
We divide our operations into four business segments (exploration and production segment, refining segment, marketing and distribution segment and chemicals segment) and corporate and others. Unless otherwise specified, the inter-segment transactions have not been eliminated in the financial data discussed in this section. In addition, the operating revenue d­atad-ata of each segment have included the “other operating revenues” of thethis segment.
The following table sets forth the operating revenues by each segment, the contribution of external sales and inter-segment sales as a percentage of operating revenues before elimination of inter-segment sales, and the contribution of external sales as a percentage of consolidated operating revenues (i.e. after elimination of inter-segment sales) for the periods indicated.
  
Year Ended December 31,
  
As a Percentage of Consolidated Operating Revenues Before Elimination of Inter-segment Sales
  
As a Percentage of Consolidated Operating Revenues After Elimination of Inter-segment Sales
 
  
2012
  
2013
  
2014
  
2013
  
2014
  
2013
  
2014
 
  (RMB in billions)  (%)  (%)  (%)  (%) 
Exploration and production                  
External sales(1)
  82   83   86   1.7   1.8   2.9   3.0 
Inter-segment sales  175   159   142   3.3   3.0      　 
Total operating revenue  257   242   228   5.0   4.8      　 
Refining                 　      　 
External sales(1)
  200   200   181   4.1   3.8   7.0   6.4 
Inter-segment sales  1,071   1,111   1,092   22.9   23.2      　 
Total operating revenue  1,271   1,311   1,273   27.0   27.0      　 
Marketing and distribution                 　      　 
External sales(1)
  1,462   1,496   1,471   30.8   31.2   51.9   52.1 
Inter-segment sales  10   6   6   0.1   0.1      　 
Total operating revenue  1,472   1,502   1,477   30.9   31.3      　 
Chemicals                 　      　 
External sales(1)
  364   382   365   7.9   7.7   13.2   12.9 
Inter-segment sales  48   56   62   1.2   1.3      　 
Total operating revenue  412   438   427   9.1   9.0      　 
Corporate and others                 　      　 
External sales(1)
  678   719   723   14.8   15.3   25.0   25.6 
Inter-segment sales  635   640   587   13.2   12.5      　 
Total operating revenue  1,313   1,359   1,310   28.0   27.8      　 
Total operating revenue before inter-segment eliminations  4,725   4,852   4,715   100.0   100.0      　 
Elimination of inter-segment sales  (1,939)  (1,972)  (1,889)             　 
Consolidated operating revenues  2,786   2,880   2,826           100.0   100.0 
                             
47

__________________________
  Year Ended December 31,  As a Percentage of Consolidated Operating Revenues Before Elimination of Inter-segment Sales  As a Percentage of Consolidated Operating Revenues After Elimination of Inter-segment Sales 
  2014  2015  2016  2015  2016  2015  2016 
  (RMB in billions)  (%)  (%)  (%)  (%) 
Exploration and production                     
External sales(1)
  86   68   57   2.1   1.8   3.4   3.0 
Inter-segment sales  142   71   59   2.2   1.9         
Total operating revenue  228   139   116   4.3   3.7         
Refining                            
External sales(1)          
  181   126   108   3.8   3.5   6.2   5.6 
Inter-segment sales  1,092   801   748   24.4   24.2         
Total operating revenue  1,273   927   856   28.2   27.7         
Marketing and distribution                            
External sales(1)          
  1,471   1,103   1,049   33.6   33.9   54.6   54.3 
Inter-segment sales  6   3   4   0.1   0.1         
Total operating revenue  1,477   1,106   1,053   33.7   34.0         
Chemicals                            
External sales(1)          
  367   285   297   8.7   9.6   14.1   15.4 
Inter-segment sales            64   43   38   1.3   1.2         
Total operating revenue  431   328   335   10.0   10.8         
Corporate and others                            
External sales(1)          
  723   438   420   13.3   13.5   21.7   21.7 
Inter-segment sales            587   346   320   10.5   10.3         
Total operating revenue  1,310   784   740   23.8   23.8         
Total operating revenue before inter-segment eliminations            4,719   3,284   3,100   100.0   100.0         
Elimination of inter-segment sales  (1,891)  (1,264)  (1,169)                
Consolidated operating revenues          
  2,828   2,020   1,931           100.0   100.0 

(1)include other operating revenues.
     ____________

(1) include other operating revenues.

The following table sets forth the operating revenues, operating expenses and operating income/(loss) by each segment before elimination of the inter-segment transactions for the periods indicated, and the changes from 20132015 to 2014.2016.
  
Year Ended December 31,
  Change from 
  2014  2015  2016  2015 to 2016 
  (RMB in billions)  (%) 
Exploration and production            
Total operating revenues            228   139   116   (16.5)
Total operating expenses            (181)  (156)  (153)  (1.9)
Total operating income/(loss)            47   (17)  (37)  117.6 
Refining                
Total operating revenues            1,273   927   856   (7.7)
Total operating expenses            (1,275)  (906)  (800)  (11.7)

4748
 Year Ended December 31,  Change from 2013 to 2014  
Year Ended December 31,
  Change from 
 2012  2013  2014    2014  2015  2016  2015 to 2016 
 (RMB in billions)  (%)  (RMB in billions)  (%) 
Exploration and production            
Total operating revenues  257   242   228   (5.8)
Total operating expenses  (187)  (187)  (181)  (3.2)
Total operating income  70   55   47   (14.5)
Refining             　 
Total operating (loss)/income   (2)  21   56   166.7 
Marketing and distribution                
Total operating revenues  1,271   1,311   1,273   (2.9)  1,477   1,107   1,053   (4.9)
Total operating expenses  (1,282)  (1,302)  (1,275)  (2.1)  (1,448)  (1,078)  (1,021)  (5.3)
Total operating income/(loss)  (11)  9   (2)  -   29   29   32   10.3 
Marketing and distribution             　 
Total operating revenues  1,472   1,502   1,477   (1.7)
Total operating expenses  (1,429)  (1,467)  (1,448)  (1.3)
Total operating income  43   35   29   (17.1)
Chemicals             　                 
Total operating revenues  412   438   427   (2.5)  431   329   335   1.8 
Total operating expenses  (411)  (437)  (429)  (1.8)  (433)  (309)  (314)  1.6 
Total operating income  1   1   (2)  - 
Total operating (loss)/income   (2)  20   21   5.0 
Corporate and others             　                 
Total operating revenues  1,313   1,359   1,310   (3.6)  1,310   784   740   (5.6)
Total operating expenses  (1,315)  (1,362)  (1,311)  (3.7)  (1,311)  (784)  (737)  (6.0)
Total operating loss  (2)  (3)  (1)  (66.7)
Elimination of inter-segment income (loss)  (1)  1   2   - 
                
Total operating (loss)/income   (1)  0   3   N/A 
Elimination of inter-segment income  2   5   2     

Exploration and Production Segment
Most of the crude oil and a portion of the natural gas produced by the exploration and production segment were used for our refining and chemicals operations. Most of our natural gas and a small portion of crude oil were sold to other customers.
Year Ended December 31, 20142016 Compared with Year Ended December 31, 2013
2015
In 2014,2016, the operating revenues of this segment were RMB 227.6115.9 billion, representing a decrease of 6.0%16.5% over 2013.2015. This was mainly attributable to the decreaseprice decline of crude oil and natural gas and sales price and volume decrease of crude oil.
TheThis segment sold 43.3736.38 million tonnes of crude oil and 17.9820.56 billion cubic meters of natural gas in 2014,2016, representing a decrease of 2.0%13.8% and an increase of 5.8%3.7% over 2013,2015, respectively. The average realized price of crude oil and natural gas were RMB 3,9441,734 per tonne and RMB 1,5991,267 per thousand cubic meters, respectively, representing a decrease of 6.0%13.9% and an increase of 17.6%17.5%, respectively, over 2013.
2015.
In 2014,2016, the operating expenses of this segment were RMB 180.5152.6 billion, representing a decrease of 3.6%2.2% over 2013.2015. This was mainly due to:
·The exploration expenses decreased by RMB 1.6 billion over 2013, reflecting our optimization of exploration investment which improve the exploration efficiency;
·The special oil income levy, resource tax and other taxes decreased by RMB 3.4 billion due to the decline in crude oil price;
·Other operation expenses decreased by 6.1 billion due to the decrease of raw material sales expenses which is related to the decline in sales revenue; and
·The expense of depreciation,Depreciation, depletion and amortization increased by RMB 4.89.8 billion, over 2013.primarily as a result of downward revision of oil and gas reserve due to price decrease;
·Impairment of oil and gas assets increased by RMB 6.7 billion, as a result of downward revision of oil and gas reserve due to price decrease and high operating and development cost for certain oil fields; and
48

·other expenses (net) decreased by RMB 20.6 billion, as a result of the restructuring of Sichuan-to-East China Pipeline Co.
The lifting cost for oil and gas was RMB 804786 per tonne in 2014,2016, representing a slight increase of 0.5%0.8% despite of  the production volume of crude oil decreased by 13.2% over 2013. This was primarily due2015.
In 2016, the segment made every effort to optimize resource mix, attached great emphasis on cash flow contributions, and proactively controlled costs. Due to the effectiveness of our cost control.
In 2014, the operating income of this segment was RMB 47.1 billion, representing a decrease of 14.1% over 2013, which was primarily due to the decreasedrop in crude oil price.and natural gas prices, the operating loss of the exploration and production segment were RMB 36.6 billion, representing an expanded losses as compared with 2015.
Year Ended December 31, 20132015 Compared with Year Ended December 31, 2012
2014
In 2013,2015, the operating revenues of this segment were RMB 242.1138.7 billion, representing a decrease of 5.9%39.1% over 2012.2014. This iswas mainly attributable to the decreased salesdecline of realized price of crude oil.
The49
This segment sold 44.2442.22 million tonnes of crude oil and 17.019.83 billion cubic meters of natural gas in 2013,2015, representing an increasea decrease of 0.4%2.6% and an increase of 12.6%10.3% over 2012,2014, respectively. The average realized price of crude oil and natural gas were RMB 4,1952,014 per tonne and RMB 1,3591,535 per thousand cubic meters, respectively, representing a decrease of 6.6%48.9% and an increase of 5.2%4.0%, respectively, over 2012.
2014.
In 2013,2015, the operating expenses of this segment were RMB 187.3156.1 billion, representing an increasea decrease of 0.1%13.6% over 2012.2014. This was mainly due to:
·Special oil income levy and resources tax dropped by RMB 25.9 billion owing to the decline of crude oil price;
·The expenses of rent for land and community service expenses increasedBy strengthening cost control, operating costs decreased by RMB 4.0 billion over 2012;2.3 billion; and
·The expense of depreciation,Depreciation, depletion and amortization increased by RMB 4.83.3 billion over 2012;.
·The exploration expenses decreased by RMB 3.0 billion over 2012, reflecting our enhanced exploration activities which improve the exploration efficiency; and
·The special oil income levy, resource tax and other taxes decreased by RMB 4.4 billion.
The lifting cost for oil and gas was RMB 800780 per tonne in 2013,2015, representing an increasea year-on-year decrease of 1.8%3.0% over 2012.2014. This was primarily duemainly attributable to stricter cost cutting policy put forward by the Company in respond to the increases in the pricedecline of fuels, power and labor expense.
crude oil price.
In 2013,2015, the operating incomeloss of this segment was RMB 54.817.4 billion, representing a decrease of 21.8%RMB 64.5 billion over 2012,2014, which was primarily dueattributable to the decrease insharp decline of crude oil price.
Refining Segment
Business activities of the refining segment consist of purchasing crude oil from third parties and from our exploration and production segment, processing crude oil into refined petroleumoil products, selling gasoline, diesel and kerosene to the marketing and distribution segment, selling a portion of chemical feedstock to our chemicals segment, and selling other refined petroleumoil products to the domestic and overseas customers.
Year Ended December 31, 20142016 Compared with Year Ended December 31, 2013
2015
In 2014,2016, the operating revenues of this segment were RMB 1,273.1855.8 billion, representing a decrease of 2.9%7.7% over 2013.2015. This was mainly attributable to the price decline of refined petroleumoil products.
The table below sets forth sales volume and average realized prices by product for 20142016 and 2013,2015, as well as the percentage changes in sales volume and average realized prices for the periods shown.
  
Sales volume
  Change from2013 to 2014  
Average realized prices
  Change from 2013 to 2014 
  
2014
  
2013
    
2014
  
2013
   
  (thousand tonnes)  (%)  (RMB per tonne)  (%) 
Gasoline
  47,786   42,759   11.8   7,784   7,879   (1.2)
Diesel
  67,945   72,402   (6.2)  6,288   6,571   (4.3)
Kerosene
  12,410   11,944   3.9   5,705   6,116   (6.7)
Chemical feedstock
  37,690   36,353   3.7   5,333   5,722   (6.8)
Other refined petroleum products
  49,901   51,207   (2.6)  3,943   4,136   (4.7)
49
  Sales volume  Change from  Average realized prices  Change from 
  2015  2016  2015 to 2016  2015  2016  2015 to 2016 
  (thousand tonnes)  (%)  (RMB per tonne)  (%) 
Gasoline            50,921   52,461   3.0   6,191   5,904   (4.6)
Diesel            63,359   58,734   (7.3)  4,797   4,505   (6.1)
Kerosene            13,518   14,529   7.5   3,420   2,814   (17.7)
Chemical feedstock            35,945   36,408   1.3   2,984   2,584   (13.4)
Other refined oil products            52,418   55,742   6.3   2,842   2,529   (11.0)

In 2014,2016, our sales revenues of gasoline were RMB 372.0309.7 billion, representing an increasea decrease of 10.4%1.8% over 2013;2015; the sales revenues of diesel were RMB 427.2264.6 billion, representing a decrease of 10.2%12.9% over 2013;2015; the sales revenues of kerosene were RMB 70.840.9 billion, representing a decrease of 3.1%11.6% over 2013;2015; the sales revenues of chemical feedstock were RMB 201.094.1 billion, representing a decrease of 3.4%12.3% over 2013;2015; and the sales revenues of other refined petroleumoil products other than gasoline, diesel, kerosene and chemical feedstock were RMB 196.8141.0 billion, representing a decrease of 7.1%5.4% over 2013.2015.
TheThis segment’s operating expenses were RMB 1,275.0799.5 billion in 2014,2016, representing a decrease of 2.1%11.7% over 2013,2015, which is mainly attributable to the decline in procurement cost of crude oil.
50
In 2014,2016, the average unit cost of refining feedstock processed was RMB 4,6952,194 per tonne, representing a decrease of 3.3%18.5% over 2013.2015. Refining throughput were 223.88220.98 million tonnes (excluding the volume processed for third parties), representing an increasea decrease of 0.3%1.1% over 2013.2015. In 2014,2016, the total costs of refining feedstock processed were RMB 1,051.2484.8 billion, representing a decrease of 3.0%19.4% over 2013.
2015.
The refining margin was RMB 213.0471.9 per tonne in 2014,2016, representing a decreasean increase of RMB 48.1153.8 per tonne over 2013.2015. This was mainly attributable to continuous decline inthe rebound of international crude oil price, and floor prices policy for refined oil products announced by the relatively long period from procurement of raw materials to sales of products which reducedPRC government, therefore widened the price spread between raw materials and products.
In 2014,2016, the unit refining cash operating cost (defined as operating expenses less the purchase cost of crude oil and refining feedstock, depreciation and amortization, taxes other than income tax and other operating expenses, and divided by the refinery throughput) was RMB 165.9165.7 per tonne, representing a decrease of 1.5% over 2013.decreased by RMB 1.9 per tonne. This was mainly dueattributable to enhancementstrengthening of internalcost control, improving operating efficiency and reducing costs of fuel, electricity and other auxiliaries facilities.
In 2016, this segment utilized the rebound of oil price, strengthened crude oil procurement management, adjusted structure with market-oriented efforts, increased exports and reductionimproved the profitability of various expenses.self-selling products, and as a result, realized significant increase in operating profit.
TheThis segment’s operating lossincome was RMB 2.056.3 billion in 2014, comparing to2016, representing an operating incomeincrease of RMB 8.635.3 billion in 2013.
as compared with 2015.
Year Ended December 31, 20132015 Compared with Year Ended December 31, 2012
2014
In 2013,2015, the operating revenues of this segment were RMB 1,311.3926.6 billion, representing an increasea decrease of 3.2%27.2% over 2012.2014. This was mainly attributable to the increase in sales volumesprice decline of the refined petroleumoil products.
The table below sets forth sales volume and average realized prices by product for 20132015 and 2012,2014, as well as the percentage changes in sales volume and average realized prices for the periods shown.
  Sales volume  Change from 2012 to 2013  Average realized prices  Change from 2012 to 2013 
  
2013
  
2012
    
2013
  
2012
   
  (thousand tonnes)  (%)  (RMB per tonne)  (%) 
Gasoline
  42,759   38,473   11.1   7,879   7,957   (1.0)
Diesel
  72,402   72,883   (0.7)  6,571   6,682   (1.7)
Kerosene
  11,944   10,262   16.4   6,116   6,379   (4.1)
Chemical feedstock
  36,353   34,431   5.6   5,722   5,983   (4.4)
Other refined petroleum products
  51,207   46,932   9.1   4,136   4,267   (3.1)

  Sales volume  Change from  Average realized prices  Change from 
  2014  2015  2014 to 2015  2014  2015  2014 to 2015 
  (thousand tonnes)  (%)  (RMB per tonne)  (%) 
Gasoline            47,786   50,921   6.6   7,784   6,191   (20.5)
Diesel            67,945   63,359   (6.7)  6,288   4,797   (23.7)
Kerosene            12,410   13,518   8.9   5,705   3,420   (40.1)
Chemical feedstock            37,690   35,945   (4.6)  5,333   2,984   (44.1)
Other refined oil products            49,901   52,418   5.0   3,943   2,842   (27.9)
In 2013,2015, our sales revenues of gasoline were RMB 336.9315.3 billion, representing an increasea decrease of 10.0%15.2% over 2012;2014; the sales revenues of diesel were RMB 475.7303.9 billion, representing a decrease of 2.3%28.9% over 2012;2014; the sales revenues of kerosene were RMB 73.146.2 billion, representing an increasea decrease of 11.6%34.7% over 2012;2014; the sales revenues of chemical feedstock were RMB 208.0107.3 billion, representing an increasea decrease of 1.0%46.6% over 2012;2014; and the sales revenues of other refined petroleumoil products other than gasoline, diesel, kerosene and chemical feedstock were RMB 211.8148.9 billion, representing an increasea decrease of 5.8%24.3% over 2012.2014.
TheThis segment’s operating expenses were RMB 1,302.7905.7 billion in 2013,2015, representing an increasea decrease of 1.6%29.0% over 2012,2014, which is mainly attributable to the increasedecline in procurement cost of cost related to upgrading oil quality and consumption tax related to the increased sales volume of refined oil products.
50

crude oil.
In 2013,2015, the average unit cost of refining feedstock processed was RMB 4,8562,693 per tonne, representing a decrease of 5.6%42.6% over 2012.2014. Refining throughput were 223.24223.43 million tonnes (excluding the volume processed for third parties), representing an increasea decrease of 5.3%0.2% over 2012.2014. In 2013,2015, the total costs of refining feedstock processed were RMB 1,084.0601.7 billion, representing a decrease of 0.7%42.8% over 2012.
2014.
The refining margin was RMB 261.1318.1 per tonne in 2013,2015, representing an increase of RMB 104.6105.1 per tonne over 2012.2014. This was mainly attributable to the improvement of China’s pricing mechanism forcontinuous decline in international crude oil productsprice, and the implementation of the policy which allows raising priceprices of refined oil product with higher quality.products dropped less, therefore widened the price spread between raw materials and products.
51
In 2013,2015, the unit refining cash operating cost (defined as operating expenses less the purchase cost of crude oil and refining feedstock, depreciation and amortization, taxes other than income tax and other operating expenses, and divided by the refinery throughput) was RMB 168.5167.6 per tonne, remaining flat over 2014 despite of investment in refined oil products quality upgrading.
This segment’s operating income was RMB 21.0 billion in 2015, representing an increase of RMB 11.0 per tonne over 2012.22.9 billion as compared with 2014. This was mainly due to the increasetimely adjustment of refined oil product prices, tapping the Company’s well established advantages in rent for land and external purchase pricesscale of supporting materials, power and fuels for the purpose of upgrading the qualityrefining, as well as production increase of oil products.
The segment’s operating incomeproducts and high-value-added products for which demand was RMB 8.6 billion in 2013, comparing to an operating loss of RMB 11.4 billion in 2012.strong.
Marketing and Distribution Segment
The business activities of the marketing and distribution segment include purchasing refined oil products from our refining segment and third parties, making wholesale and direct salesdistribution to domestic customers, and retail of the refined oil products through thethis segment’s retail distribution network, as well as providing related services.
Year Ended December 31, 20142016 Compared with Year Ended December 31, 2013
2015
In 2014,2016, the operating revenues of this segment were RMB 1,476.61,052.9 billion, representing a decrease of 1.7%4.9% compared with 2013.
2015.
In 2014,2016, the sales revenues of gasoline, diesel and kerosene were RMB 535.2495.2 billion, RMB 686.4412.0 billion and RMB 124.770.6 billion, representing an increase of 5.8%5.1%, a decrease of 3.1%13.0% and an increasea decrease of 0.8%9.5%, respectively, over 2013.
2015.
The following table sets forth the sales volumes, average realized prices and the respective rates of changes of the four major product categories in 20142016 and 20132015, including breakdown in different formsretail, wholesale and distribution of sales channels.gasoline and diesel.
 Sales Volume  Change from 2013 to 2014  Average Realized Prices  Change from 2013 to 2014  Sales Volume  Change from  Average Realized Prices  Change from 
 
2014
  
2013
    
2014
  
2013
    2015  2016  2015 to 2016  2015  2016  2015 to 2016 
 (thousand tonnes)  (%)  (RMB per tonne)  (%)  (thousand tonnes)  (%)  (RMB per tonne)  (%) 
Gasoline
  64,190   59,523   7.8   8,338   8,498   (1.9)  69,842   77,613   11.1   6,747   6,380   (5.4)
Retail sale
  53,003   49,733   6.6   8,585   8,690   (1.2)  58,211   63,718   9.5   6,996   6,722   (3.9)
Wholesale and distribution
  11,187   9,791   14.3   7,166   7,524   (4.8)  11,631   13,895   19.5   5,498   4,812   (12.5)
Diesel
  103,255   100,477   2.8   6,648   7,049   (5.7)  95,907   91,998   (4.1)  4,936   4,478   (9.3)
Retail sale
  55,934   58,148   (3.8)  7,029   7,325   (4.0)  50,756   46,656   (8.1)  5,490   5,088   (7.3)
Wholesale and distribution
  47,322   42,328   11.8   6,196   6,671   (7.1)  45,151   45,342   0.4   4,314   3,851   (10.7)
Kerosene
  21,845   20,232   8.0   5,710   6,116   (6.6)  23,028   25,164   9.3   3,387   2,807   (17.1)
Fuel oil
  25,537   33,100   (22.8)  4,016   4,333   (7.3)  24,980   22,034   (11.8)  2,215   1,703   (23.1)
The operating expenses of thethis segment in 20142016 was RMB 1,447.21,020.7 billion, representing a decrease of RMB 20.157.1 billion or 1.4%5.3%, over 2013,2015, which was mainly attributable to the decrease of purchase volume and purchase costs as a result of price decline of oil products.
diesel and fuel oil.
In 2014, the2016, this segment’s unit cash selling expenses of refined oil products per tonne (defined as the operating expenses less the purchasing costs, taxes other than income tax, depreciation and amortization and divided by the sales volume) was RMB 192.8197.3 per tonne, representing a decreasean increase of 1.7%.4.3% over 2015.

51

In 2016, facing abundant domestic supply of refined oil products and strong market competition, the segment made full use of the advantages of our extensive sales network to actively expand the gasoline market, increased sales of high-grade gasoline and expanded the total sales volume, coordinated for more efficient utilization of  internal and external resources, which led to improved profit margins and better performance.
The operating income of thethis segment in 20142016 was RMB 29.432.2 billion, representing a decreasean increase of 16.2%11.4% over 2013, mainly attributable to 11 consecutive price cuts of domestic refined oil products in the second half of 2014, which consumed the high-cost inventory.
2015.
Year Ended December 31, 20132015 Compared with Year Ended December 31, 20122014
52
In 2013,2015, the operating revenues of this segment were RMB 1,502.41,106.7 billion, representing an increasea decrease of 2.1%25.1% compared with 2012.
2014.
In 2013,2015, the sales revenues of gasoline, diesel and kerosene were RMB 505.8471.2 billion, RMB 708.3473.4 billion and RMB 123.778.0 billion, representing an increasea decrease of 9.7%12.0%, a decrease of 2.6%31.0% and an increasea decrease of 2.9%37.5%, respectively, over 2012.
2014.
The following table sets forth the sales volumes, average realized prices and the respective rates of changes of the four major product categories in 20132015 and 20122014, including breakdown in different formsretail, wholesale and distribution of sales channels.gasoline and diesel.
 Sales Volume  Change from2012 to 2013  Average Realized Prices  Change from 2012 to 2013  Sales Volume  Change from  Average Realized Prices  Change from 
 
2013
  
2012
    
2013
  
2012
    2014  2015  2014 to 2015  2014  2015  2014 to 2015 
 (thousand tonnes)  (%)  (RMB per tonne)  (%)  (thousand tonnes)  (%)  (RMB per tonne)  (%) 
Gasoline
  59,523   53,535   11.2   8,498   8,614   (1.4)  64,190   69,842   8.8   8,338   6,747   (19.1)
Retail sale
  49,733   45,477   9.4   8,690   8,744   (0.6)  53,003   58,211   9.8   8,585   6,996   (18.5)
Wholesale and distribution
  9,791   8,058   21.5   7,524   7,881   (4.5)  11,187   11,631   4.0   7,166   5,498   (23.3)
Diesel
  100,477   100,790   (0.3)  7,049   7,213   (2.3)  103,255   95,907   (7.1)  6,648   4,936   (25.7)
Retail sale
  58,148   57,382   1.3   7,325   7,454   (1.7)  55,934   50,756   (9.3)  7,029   5,490   (21.9)
Wholesale and distribution
  42,328   43,408   (2.5)  6,671   6,895   (3.2)  47,322   45,151   (4.6)  6,196   4,314   (30.4)
Kerosene
  20,232   18,741   8.0   6,116   6,416   (4.7)  21,845   23,028   5.4   5,710   3,387   (40.7)
Fuel oil
  33,100   29,690   11.5   4,333   4,622   (6.3)  25,537   24,980   (2.2)  4,016   2,215   (44.8)
The operating expenses of thethis segment in 20132015 was RMB 1,467.31,077.8 billion, representing an increasea decrease of RMB 38.0369.3 billion or 2.7%25.5%, over 2012,2014, which was mainly attributable to the increasedecrease of purchase costs as a result of increased sales volumeprice decline of refined oil products.
In 2013, the2015, this segment’s unit cash selling expenses of refined oil products per tonne (defined as the operating expenses less the purchasing costs, taxes other than income tax, depreciation and amortization and divided by the sales volume) was RMB 196.1189.2 per tonne, representing an increasea decrease of 5.3%, which was mainly due to the increase in the rent for land as well as labor cost.
1.9%.
The operating income of thethis segment in 20132015 was RMB 35.128.9 billion, representing a decrease of 17.6%2.0% over 2012.2014.
Chemicals Segment
The business activities of the chemicals segment include purchasing chemical feedstock from our refining segment and third parties, producing, marketing and distributing petrochemical and inorganic chemical products.
Year Ended December 31, 20142016 Compared with Year Ended December 31, 2013
2015
The operating revenues of the chemicals segment in 20142016 were RMB 427.5335.1 billion, representing a decreasean increase of 2.3%1.8% over 2013,2015, which was mainly attributable to the decreaseincrease in pricessales volume of chemical products.
The sales revenues of our six major categories of chemical products (namely basic organic chemicals, synthetic resins, synthetic fiber monomers and polymers for synthetic fiber, synthetic fiber, synthetic rubber and chemical fertilizer) of this segment in 20142016 were approximately RMB 405.4316.2 billion, representing a decreasean increase of 2.6%2.1% compared with 2013,2015, accounting for 94.8%94.3% of the operating revenues of this segment.
The following table sets forth the sales volume, average realized price and the respective rates of changes for each of these six categories of chemical products of this segment from 20132015 to 2014.2016.
  Sales Volume  Change from  Average Realized Prices  Change from 
  2015  2016  2015 to 2016  2015  2016  2015 to 2016 
  (thousand tonnes)  (%)  (RMB per tonne)  (%) 
Basic organic chemicals            38,903   41,605   6.9   4,121   3,963   (3.8)

5253
  Sales Volume  Change from 2013 to 2014  Average Realized Prices  Change from 2013 to 2014 
  
2014
  
2013
    
2014
  
2013
   
  (thousand tonnes)  (%)  (RMB per tonne)  (%) 
Basic organic chemicals
  35,788   32,971   8.5   6,118   6,764   (9.6)
Synthetic fiber monomers and polymers
  6,496   6,883   (5.6)  7,220   8,161   (11.5)
Synthetic resins
  11,603   10,700   8.4   9,679   9,631   0.5 
Synthetic fiber
  1,430   1,488   (3.9)  9,436   10,356   (8.9)
Synthetic rubber
  1,207   1,349   (10.5)  10,549   12,203   (13.6)
Chemical fertilizer
  598   1,129   (47.0)  1,686   1,698   (0.7)

  Sales Volume  Change from  Average Realized Prices  Change from 
  2015  2016  2015 to 2016  2015  2016  2015 to 2016 
  (thousand tonnes)  (%)  (RMB per tonne)  (%) 
Synthetic fiber monomers and polymers         
  6,083   7,169   17.9   5,797   5,328   (8.1)
Synthetic resins            11,993   12,250   2.1   7,771   7,482   (3.7)
Synthetic fiber            1,380   1,369   (0.8)  7,739   7,113   (8.1)
Synthetic rubber            1,107   1,099   (0.7)  8,769   9,609   9.6 
Chemical fertilizer            243   714   193.8   1,823   1,612   (11.6)
The operating expenses of this segment in 20142016 were RMB 429.7314.5 billion, representing a decreasean increase of 1.6% over 2013. This was mainly attributable to the decline in chemical feedstock prices which resulted in the decrease in raw material costs by RMB 12.1 billion or 3.3% over 2013.2015.
In 2014,2016, the segment seized the favorable opportunities of the low feed stock price, further adjust feed stock and product mix, coordinated production with sales, strictly controlled costs and expenses, thus, resulting in remarkable profits.
In 2016, the operating lossincome of this segment was RMB 2.220.6 billion, representing an increase of RMB 1.1 billion as compared with an operating profit of RMB 0.9 billion in 2013.
2015.
Year Ended December 31, 20132015 Compared with Year Ended December 31, 2012
2014
The operating revenues of the chemicals segment in 20132015 were RMB 437.6328.9 billion, representing an increasea decrease of 6.2%23.7% over 2012,2014, which was mainly attributable to our active exploration of the market resultingdecrease in an increase of 7.6% in sales volumeprices of chemical products, over 2012, despitepartly offset by the volume increase of the decrease of 1.1% of the prices for chemical products over 2012.
basic organic chemicals and synthetic resin.
The sales revenues of our six major categories of chemical products (namely basic organic chemicals, synthetic resins, synthetic fiber monomers and polymers for synthetic fiber, synthetic fiber, synthetic rubber and chemical fertilizer) of this segment in 20132015 were approximately RMB 416.0309.6 billion, representing an increasea decrease of 5.6%23.6% compared with 2012,2014, accounting for 95.1%94.9% of the operating revenues of this segment.
The following table sets forth the sales volume, average realized price and the respective rates of changes for each of these six categories of chemical products of this segment from 20122014 to 2013.2015.
  Sales Volume  Change from 2012 to 2013  Average Realized Prices  Change from 2012 to 2013 
  
2013
  
2012
    
2013
  
2012
   
  (thousand tonnes)  (%)  (RMB per tonne)  (%) 
Basic organic chemicals  32,971   29,873   10.4   6,764   6,667   1.5 
Synthetic fiber monomers and polymers  6,883   6,972   (1.3)  8,161   8,231   (0.9)
Synthetic resins  10,700   10,507   1.8   9,631   9,182   4.9 
Synthetic fiber  1,488   1,458   2.1   10,356   10,790   (4.0)
Synthetic rubber  1,349   1,289   4.7   12,203   17,553   (30.5)
Chemical fertilizer  1,129   1,232   (8.4)  1,698   2,044   (16.9)

  Sales Volume  Change from  Average Realized Prices  Change from 
  2014  2015  2014 to 2015  2014  2015  2014 to 2015 
  (thousand tonnes)  (%)  (RMB per tonne)  (%) 
Basic organic chemicals            35,788   38,903   8.7   6,118   4,121   (32.6)
Synthetic fiber monomers and polymers            6,496   6,083   (6.4)  7,220   5,797   (19.7)
Synthetic resins            11,603   11,993   3.4   9,679   7,771   (19.7)
Synthetic fiber            1,430   1,380   (3.5)  9,436   7,739   (18.0)
Synthetic rubber            1,207   1,107   (8.3)  10,549   8,769   (16.9)
Chemical fertilizer            598   243   (59.4)  1,686   1,823   8.1 
The operating expenses of this segment in 20132015 were RMB 436.7309.4 billion, representing an increasea decrease of 6.3%28.6% over 2012.2014. This was mainly attributable to the increasedecline in trade volume andchemical feedstock prices which resulted in the increasedecrease in raw material costs by RMB 25.1115.2 billion or 7.4%32.6% over 2012.
2014 as the crude oil prices dropped.
In 2013,2015, the operating income of this segment was RMB 0.919.5 billion, representing a decreasean increase of RMB 0.321.7 billion or 26.3% against 2012, whichas compared with 2014. This was mainly becausedue to the increasing competitiveness of significant drop ofnaphtha-based chemical and preferable product prices (other than price for basic chemical products and synthetic resin) compared with 2012.margin as feedstock costs lowered.
Corporate and Others
The business activities of corporate and others mainly consist of the import and export business activities of our subsidiaries, research and development activities of us and managerial activities of our headquarters.
53

Year Ended December 31, 20142016 Compared with Year Ended December 31, 20132015
54
In 2014,2016, the operating revenue generated from corporate and others was RMB 1,310.2739.9 billion, among which the sales revenues realized by subsidiaries such as trading companies were RMB 736.2 billion, representing decrease of 3.6%5.6% over 2013,2015, which was mainly attributable to the decrease in trading incomes caused by price drop of crude oil and refinedas well as lower revenue from crude oil products caused by the price cut of international crude oil. This includes operating revenue of RMB 1,306.1 billion from trading companies.
business as compared with 2015.
In 2014,2016, the operating expenses of this segment was RMB 1,311.3736.7 billion, among which operating expenses realized by subsidiaries such as trading companies were RMB 728.0 billion, representing a decrease of 3.8%6.0% over 2013. This includes2015.
In 2016, the operating expense of RMB 1,304.3 billion from trading companies.
In 2014, the operating lossincome of this segment was RMB 1.13.2 billion, among which the operating income realized by subsidiaries such as trading companies was RMB 8.2 billion. This includes operating profit of RMB 1.8 billion from trading companies.
Year Ended December 31, 20132015 Compared with Year Ended December 31, 2012
2014
In 2013,2015, the operating revenue generated from corporate and others was RMB 1,359.1783.9 billion, among which the sales revenues realized by subsidiaries such as trading companies were RMB 779.3 billion, representing an increasedecrease of 3.5%40.2% over 2012,2014, which was mainly attributable to the increasedecrease in trade volumetrading incomes caused by price drop of crude oil and refined oil products. This includes operating revenue of RMB 1,354.9 billion from trading companies.
oil.
In 2013,2015, the operating expenses of this segment was RMB 1,362.5783.5 billion, among which operating expenses realized by subsidiaries such as trading companies were RMB 775.5 billion, representing an increasea decrease of 3.6%40.3% over 2012. This includes2014.
In 2015, the operating expense of RMB 1,353.6 billion from trading companies.
In 2013, the operating lossincome of this segment was RMB 3.40.4 billion, among which the operating profit realized by subsidiaries such as trading companies was RMB 3.8 billion.
D.D.          LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of funding have been cash provided by our operating activities, along with short-term and long-term loans. Our primary uses of cash have been for working capital, capital expenditures and repayment of short-term and long-term loans. We arrange and negotiate financing with financial institutions to finance our capital resource requirement, and maintain a certain level of standby credit facilities to reduce liquidity risk. We believe that our current cash on hand, expected cash flows from operations and available standby credit facilities from financial institutions will be sufficient to meet our working capital requirements and repay our short term debts and obligations when they become due.
The following table sets forth a summary of our consolidated statements of cash flow data for the years ended December 31, 2012, 20132014, 2015 and 2014.2016.
  Year Ended December 31, 
Statement of cash flow data 2014  2015  2016 
  (RMB in millions) 
Net cash generated from operating activities            148,019   165,740   214,543 
Net cash used in investing activities            (132,321)  (116,719)  (66,217)
Net cash (used in)/generated from financing activities  (21,524)  9,093   (93,047)
Net (decrease)/increase in cash and cash equivalents  (5,826)  58,114   55,279 
The net cash generated from our operating activities in 2016 was RMB 214.5 billion, representing an increase of RMB 48.8 billion over 2015, which was mainly due to an increase in earnings before income tax by RMB 23.7 billion, optimized fund utilization and improvement on working capital.
  Year Ended December 31, 
Statement of cash flow data 
2014
  
2013
  
2012
 
  (RMB in millions) 
Net cash generated from operating activities  148,347   151,893   142,380 
Net cash used in investing activities  (132,633)  (178,740)  (162,197)
Net cash used/generated from financing activities  (21,421)  31,519   5,628 
Net decrease/increase in cash and cash equivalents  (5,707)  4,672   (14,189)
The net cash generated from our operating activities in 2015 was RMB 165.7 billion, representing an increase of RMB 17.7 billion over 2014, which was mainly due to the decrease in earnings before tax and improvement on working capital.

The net cash generated from our operating activities in 2014 was RMB 148.3148.0 billion, representing a decrease of RMB 3.63.5 billion over 2013, which was mainly due to the decrease in profitearnings before taxationtax and improvement on working capital.
The net cash generated fromused in our operatinginvesting activities in 20132016 was RMB 151.9 billion, representing an increase of RMB 9.5 billion over 2012, which was mainly due to the increase in pre-tax profit, depreciation, depletion and amortization for the same period.
The net cash generated from our operating activities in 2012 was RMB142.466.2 billion, representing a decrease of RMB8.2RMB 50.5 billion over 2011,2015, which was mainly due to the decrease of pre-tax profit forcapital expenditure by RMB 30.0 billion and RMB 13.2 billion received as proceeds from the samesale of equity interest in Sinopec Sichuan-to-East China Pipeline Co., Ltd..
55
The net cash used in our investing activities in 2015 was RMB 116.7 billion, representing a decrease of RMB 15.6 billion over 2014, which was mainly due to the decrease of fixed assets expenditure in the reporting period.
The net cash used in our investing activities in 2014 was RMB 132.6132.3 billion, representing a decrease of RMB 46.146.0 billion over 2013, which was mainly due to our control on investment activities, of which capital expenditure and exploration expenses decreased by RMB 30.6 billion and oversea acquisitions and investments in associates and joint ventures decreased by RMB 17.1 billion, compared with 2013.
54

The net cash outflow used in our financing activities in 2016 was RMB 93.0 billion, representing a net cash outflow increase of RMB 102.1 billion over 2015, which was mainly due to  an cash inflow of RMB 105.0 billion from the capital introduction of Sinopec Marketing Co., Ltd. in 2015 and the significant reduction in interest bearing debts for two consecutive years, of which, the Company repaid RMB 62.6 billion and RMB 63.0 billion in 2015 and 2016, respectively.
The net cash used ininflow generated from our investingfinancing activities in 20132015 was RMB 178.79.1 billion, representing an increase of RMB 16.530.6 billion over 2012, which was mainly due2014. This reflected: (i) the completion of capital injection to Sinopec Marketing Co.; and (ii) the acquisitionrepayment of equity interests in CIR, Taihu and Mansarovar.
The net cash used in our investing activities in 2012 was RMB162.2 billion, representing an increase of RMB21.7 billion over 2011, which reflected the growth of our investments as planned for our rapid development.
high interest bearing debts.
The net cash outflow fromused in our financing activities in 2014 was RMB 21.421.5 billion, representing a decrease of RMB 52.952.7 billion over 2013. This reflected: (i) proceeds from issuing shares decreased by RMB 19.4 billion; (ii) contributions to subsidiaries from non-controlling shareholders decreased by RMB 8.6 billion and (iii) interest bearing debt financing incremental amount decreased by RMB 23.5 billion.
The net cash inflow from our financing activities in 2013 was RMB 31.5 billion, representing an increase of RMB 25.9 billion over 2012. This reflected: (i) increase of cash inflow of RMB 19.4 billion as a result of our H share placement and issuance; (ii) increase of cash inflow of RMB 11.2 billion as a result of non-controlling shareholder’s investments, among which Sinopec International Petroleum Exploration and Development Co., Ltd. and Sinopec Kantons Holdings Co., Ltd. received RMB 9.2 billion and RMB 2.1 billion, respectively; and (iii) decrease of cash inflow of RMB 4.3 billion from interest-bearing debt financing against 2012.
The net cash inflow from our financing activities in 2012 was RMB 5.6 billion, representing an increase of RMB 8.1 billion comparing to a net cash outflow of RMB 2.5 billion in 2011. This reflected: (i) an increase of cash inflow of RMB 16.2 billion from RMB 41.8 billion of corporate bonds issued and bank loans borrowed in 2012; and (ii) an increase in cash outflow of RMB 8.1 billion as a result of dividend and interest payments of RMB 36.2 billion in 2012. In respect of our cash flows,flow situation of 2016, we maintained ongoing and steady growthactively responded to the negative impact of operating cash flow throughout 2014 by seizing the favorable opportunitiessharp decline in international oil price, continued to compress capital expenditures, further intensified central management of stable international economic conditions and sound development of domestic economy to continually and consistently expand our operations.  We also further improved our centralized funds, management, strictly controlled the size of amount of monetary funds and interest-bearinginterest bearing debts, reduced the level of idle funds andcapital precipitation, accelerated capital turnover, which contributedcash flow to thecontinuously increase of our efficiency as a whole.operating cash flow.
In respect of our debts and borrowings, due to continuing improvement of our cash flow and receipt of proceeds from sales and investments, we increaseddecreased our debts to RMB 329.1192.3 billion at the end of 20142016 from RMB 309.5255.2 billion from the beginning of 2014.  Our short-term debts increased by RMB 14.3 billion from the beginning of 2014, and the proportion of short term debts in our total debts increased to 54.1% from 53.0% at the beginning of 2014.  Our long-term debts increased by RMB 5.3 billion from the beginning of 2014, reflecting the increase of debt financing of our company and subsidiaries, and the proportion of long term debts in our total debts decreased to 45.9% from 47.0% at the beginning of 2014.2016.  Our short-term debts, primarily consist of revolving loans borrowed according to our business plan and operation needs and overdrawing agreements entered into on the corporate bank account with our strategic-alliance banks to meet our intra-day payment requirements.requirements, decreased by RMB 40.6 billion from the beginning of 2016. Our long-term debts decreased by RMB 22.3 billion from the beginning of 2016 due to the recognition of three tranches of our corporate bonds to be matured in 2017 as non-current debt within one year.
Contractual Obligations and Commercial Commitments
The following table sets forth our obligations and commitments to make future payments under contracts and commercial commitments as of December 31, 2014.2016.
  As of December 31, 2016 
  Total  
less than 1 year
  1-3 years  4-5 years  
After 5 years
 
     (RMB in millions) 
Contractual obligations(1)
               
Short-term debt            76,145   76,145          
Long-term debt            130,069   2,832   44,416   58,284   24,537 
Total contractual obligations  206,214   78,977   44,416   58,284   24,537 
                     
Other commercial commitments                    
Operating lease commitments            344,878   14,917   28,194   26,197   275,570 
Capital commitments            148,099   148,099             
Exploration and production licenses  1,327   263   148   49   867 
Guarantees(2)          
  22,872   22,872             
Total commercial commitments  517,176   186,151   28,342   26,246   276,437 
                     
  
As of December 31, 2014
 
  Total  
less than
1 year
  1-3 years  4-5 years  
After 5 years
 
     (RMB in millions) 
Contractual obligations(1)
               
Short-term debt  179,437   179,437   -   -   - 
Long-term debt  173,957   4,590   54,905   32,662   81,800 
Total contractual obligations  353,394   184,027   54,905   32,662   81,800 
                     
Other commercial commitments                    
Operating lease commitments  363,974   13,909   26,593   26,047   297,425 
Capital commitments  241,181   138,795   102,386   -   - 
Exploration and production licenses  1,356   312   192   41   811 
Guarantees(2)
  5,720   5,720   -   -   - 
Total commercial commitments  612,231   158,736   129,171   26,088   298,236 
                     

5556
_________
(1)Contractual obligations include the contractual obligations relating to interest payments.
(2)Guarantee is not limited by time, therefore specific payment due period is not applicable. As of December 31, 2014,2016, with respect to guarantees in relation to banking facilities granted to certain parties, we have not entered into any off-balance sheet arrangements other than guarantees given to banks in respect of banking facilities granted to certain parties.arrangements. As of December 31, 2014,2016, the maximum amount of potential future payments under the guarantees was RMB 5.7222.9 billion. See Note 3029 to the consolidated financial statements for further information of the guarantees.
(3)In addition to these amounts, we have certain obligations that are not contractually fixed as to timing and amount, including obligations associated with decommissioning and restoration. See Note 27 to our consolidated financial statements for further information of the obligations.

Historical and Planned Capital Expenditure
The following table sets forth our capital expenditure by segment for the years of 2012, 20132014, 2015 and 20142016 and the capital expenditure in each segment as a percentage of our total capital expenditure for such year.
  2012  
2013
  
2014
  
Total
 
  RMB  Percent  RMB  Percent  RMB  Percent  RMB  Percent 
  (in billions, except percentage data) 
Exploration and production  79.07   46.80%  105.31   56.88%  80.20   51.86%  264.58   52.01%
Refining  32.16   19.03%  26.06   14.08%  27.96   18.08%  86.18   16.94%
Marketing and distribution  31.72   18.77%  29.49   15.93%  26.99   17.45%  88.20   17.33%
Chemicals ��23.62   13.98%  19.19   10.37%  15.85   10.25%  58.66   11.53%
Corporate and others  2.40   1.42%  5.08   2.74%  3.65   2.36%  11.13   2.19%
Capital Expenditure  168.97   100.00%  185.13   100.00%  154.64   100.00%  508.74   100.00%
                                 
  2014  2015  2016  Total 
  RMB  Percent  RMB  Percent  RMB  Percent  RMB  Percent 
  (in billions, except percentage data) 
Exploration and production  80.20   51.83%  54.71   48.67%  32.19   42.10%  167.10   48.63%
Refining  27.96   18.07%  15.13   13.46%  14.35   18.77%  57.44   16.72%
Marketing and distribution  26.99   17.44%  22.12   19.68%  18.49   24.18%  67.60   19.68%
Chemicals  15.93   10.30%  17.63   15.68%  8.85   11.58%  42.41   12.34%
Corporate and others  3.65   2.36%  2.82   2.51%  2.58   3.37%  9.05   2.63%
Capital Expenditure  154.73   100.00%  112.41   100.00%  76.46   100.00%  343.60   100.00%
                                 
In 2014,2016, focusing on quality and profitability of investment, we continuously optimized our investment projects. As a result, our capital expenditure amounted to RMB 154.6476.456 billion, among which:
·
Exploration and production. RMB 80.2032.187 billion was used in explorationfor Fuling shale gas and production segment to support theYuanba gas field development of Jiyang Depression, Sichuan Basin, Tahe oilfieldprojects and Ordos Basin, construction of LNG and long-distance oil and gas pipelinesterminal projects in Shandong and Guangxi and the overseaTianjin, as well as overseas projects. The production capacity of newly-built crude oil was 4.36 million tonnes per annum, and the production capacity of newly-built natural gas was 5.9 billion cubic meters per annum.
·
Refining. RMB 27.9614.347 billion was used in our refining segment for completion of revampinggasoline and oil productdiesel quality upgrading projects, adjustments in Shijiazhuang, Yangtze, Tahethe product mix and Jiujiang, as well as our  acquisition of 37.5% interest in YASREF through acquiring COOP from Sinopec Group Company.  We added a refining capacity of 9.5 million tonnes per year in 2014.refinery revamping projects.
·
Marketing and distribution. RMB 26.9918.493 billion was used in this segment to buildfor constructing and renovaterenovating service stations and to constructbuilding refined oil product pipelines, depots and depots. We added 556 service stations in 2014.storage facilities, as well as for rectification of safety hazards.
·
Chemicals. RMB 15.858.849 billion was spent in this segment for constructionon adjustment of the feedstock and product structure, the Ningdong coal chemical plant at Sinopec Great Wall Energy and Chemical Industry (Ningxia) Company Ltd.project and the Qilu acrylonitrileZhongtianhechuang coal to chemical project. We added a processing capacity of 190,000 tonnes per year for ethylene and 600,000 tonnes per year for synthetic resin in 2014.
·
Corporate and others. RMB 3.652.58 billion was used for researchR&D facilities and development and construction of information systems.technology application projects.

In 2015,2017, we will continue to focus on improving growthinvestment quality and efficiency implement strictand optimize the investment management procedures in arranging investments and organizing construction project.projects. The total planned capital expenditure in 20152017 amounts to RMB 135.9110.2 billion, including:
·
Exploration and productionproduction. . The planned capital expenditure in 20152017 for this segment is approximately RMB 68.2 billion. We expect50.5 billion, with the aim to focus onprioritize the exploration and productionconstruction of Phase II of Fuling shale gas project. Wedevelopment, Tianjin LNG project, and gas storage project, and overseas oil and gas project development.
56

also expect to support our construction of production capacity for our key crude oil and natural gas projects in Shengli, Sichuan Basin, Tahe, Junggar Basin and Ordos Basin as well as overseas projects, and the construction of LNG and natural gas pipelines in Guangxi and Tianjin.
·
RefiningRefining. . The planned capital expenditure in 20152017 for this segment is RMB 24.0 billion. We expect to focus on22.8 billion, mainly for building of refining bases, structural adjustments in the refining business, and revamping of refineries as well as GB VI quality upgrading of oil product quality upgrade projects and renovation projects including Qilu and Jiujiang.products.
57
·
Marketing and distribution. The planned capital expenditure in 20152017 for this segment is RMB 22.618.0 billion. We expect to focus on the constructionrevamping service stations, improving pipeline network, building oil tank farms and renovation of services stations, further construction of oil product pipelines, optimization of layout of oil houses, development of ancillary projects for non-oil businesses and improvement of our storage and transportation facilities.removing safety hazards.
·
Chemicals. The planned capital expenditure in 20152017 for this segment is RMB 15.1 billion. We expect to focus on the construction of Jinling propylene oxidethe integrated refining and LPG utilizationchemical project in Zhanjiang of Guangdong Province, the integrated refining and chemical project in Gulei of Fujian Province and the phase II ofhigh-efficiency and environmentally friendly aromatics project in Hainan PX project.refinery.
·
Corporate and others. The planned capital expenditure in 20152017 for this segment is RMB 6.03.8 billion. We expect to focus on scientific research equipment and construction ofdevelopment and information systems.technology projects.
Research and Development
Our expenditures for the research and development were RMB 5.845.63 billion in 2012,2014, RMB 6.345.65 billion in 2013,2015, and RMB 5.625.94 billion in 2014.2016.
Consumer Price Index
According to the data provided by the National Bureau of Statistics, the consumer price index in the PRC  increased by 2.0% in 2014, compared with an increase of 2.6% in 20132016 over  2015 and an increase of 2.6% in 2012.increased by 3.4% over 2014. According to China’s official analysis, the inflationincrease of consumer price index in the PRC during 20142016 was due to the increase in prices of food and fix assets investment.services. Inflation has not had a significant impact on our results of operations in 2014.
2016.
ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A.A.          DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
Directors
The table and discussion below set forth certain information concerning our directors. The current term for all our directors is three years, which will expire in May 2015.2018.
Name
Age
Age
Positions with Sinopec Corp.
Fu ChengyuWang Yupu6360Chairman
Wang TianpuDai Houliang5253Vice Chairman,
Zhang Yaocang61Vice Chairman
Li Chunguang59Director, President
Zhang JianhuaWang Zhigang5059Director, Senior Vice President
Wang ZhigangZhang Haichao5759Director, Senior Vice President
Cao YaofengJiao Fangzheng61Director
Dai Houliang
5154Director, Senior Vice President
Liu YunMa Yongsheng5855Director,
Chen Xiaojin70Independent Non-executive Director
Ma Weihua66Independent Non-executive Director Senior Vice President
Jiang Xiaoming6163Independent Non-executive Director
Andrew Y. Yan5759Independent Non-executive Director
Bao GuomingTang Min63Independent Non-executive Director
Cai Xiyou(1)
Fan Gang		6253Independent Director Senior Vice President

(1)In October 2014, Mr. Cai Xiyou tendered his resignation as the director, member of the Strategy Committee of the Board and Senior Vice President of Sinopec Corp. due to work-related arrangement.
57
Fu ChengyuWang Yupu, , aged 63,60, Chairman of the Board of Directors of Sinopec Corp., President and Secretary of Communist Party of China (“CPC”) Leading Group of Sinopec Group Company. Mr. Fu is a professor level senior engineer and obtained a master’s degree. In 1983, he successively served as Chairman of the Joint Management Committee of the joint venture projects established between China National Offshore Oil Corporation (“CNOOC”) and foreign oil giants such as Amoco, Chevron, Texaco, Phillips, Shell and Agip, etc; from 1994 to 1995, he served as Deputy General Manager of China Offshore Oil Nanhai East Corporation; in December 1995, he served as vice president of USA Phillips International Petroleum Company (Asia), and concurrently as General Manager of the Xijiang Development Project; in April 1999, he was appointed as General Manager of China National Offshore Oil Nanhai East Corporation; in September 1999, he was appointed as Executive Director, Executive Vice President and Chief Operating Officer of China National Offshore Oil Co., Ltd; in October 2000, he was appointed as Deputy General Manager of CNOOC; in December 2000, he concurrently served as President of China National Offshore Oil Co., Ltd; in August 2002, he served as Chairman and Chief Executive Officer of China Oilfield Services Co., Ltd., a subsidiary of CNOOC; in October 2003, he served as General Manager of CNOOC, and concurrently as Chairman and Chief Executive Officer of China National Offshore Oil Co., Ltd; in September 2010, Mr. Fu resigned the post of Chief Executive Officer of China National Offshore Oil Co., Ltd and continued to serve as Chairman; in April 2011, he served as Chairman and Secretary of CPC Leading Group of Sinopec Group Company; in May 2011, he was appointed as Chairman of the Board of Directors of Sinopec Corp.

Wang Tianpu, aged 52, Vice Chairman of the Board of Directors of Sinopec Corp., Director and President of Sinopec Group Company. Mr. Wang is a professor level senior engineer with a PhD degree.Ph.D. degree and an academician of the Chinese Academy of Engineering. In October 2000, he was appointed as Director, Deputy General Manager of Daqing Oilfield Company Limited; in December 2003, he was appointed as Chairman and General Manager of Daqing Oilfield Company Limited; in March 1999,2008, he was appointed as Chairman and General Manager (Director-General) of Daqing Oilfield Company Limited (Daqing Petroleum Administration Bureau); in August 2009, he was appointed as Vice PresidentGovernor of Qilu Petrochemical Company, Sinopecthe People’s Government of Heilongjiang Province. In July 2010, he was elected as Secretary of the Leading Party Member Group, Company;Vice Chairman, and First Secretary of the Secretariat of All China Federation of Trade Unions; in February 2000,March 2013, he was appointed as Vice PresidentDeputy Secretary of Sinopec Qilu Company;the Leading Party Member Group (Minister Level) of the Chinese Academy of Engineering; in September 2000,June 2014, he was appointed as Deputy Secretary of the Leading Party Member Group and Vice President (Minister Level) of Sinopec Qilu Company; in August 2001, hethe Chinese Academy of Engineering. In April 2015, Mr. Wang acts as Chairman and Secretary of the Leading Party Member Group of China Petrochemical Corporation. Mr. Wang is an Alternate Member of the 17th CPC Central Committee and a Member of the 18th CPC Central Committee. In May 2015, Mr. Wang was appointed as Vice PresidentChairman of Board of Directors of Sinopec Corp.; in April 2003, he was appointed as Senior Vice President of Sinopec Corp.; in March 2005, he was appointed as President of Sinopec Corp.; in May 2006, he was elected as Director and appointed as President of Sinopec Corp.; in May 2009, he was elected as

Dai Houliang, aged 53, Vice Chairman of the Board of Directors and President of Sinopec Corp.; in August 2011, he was elected as Director and President of Sinopec Group Company; in May 2013, he was elected as Vice Chairman of the Board of Sinopec Corp.

Zhang Yaocang, aged 61, Vice Chairman of the Board of Directors of Sinopec Corp. Mr. ZhangDai is a professor level senior engineer with a graduate degree from graduate school.Ph.D. degree. In November 1990, he was appointed as Deputy Director General of Bureau of Petroleum Geology and Marine Geology, Ministry of Geology and Mineral Resources (“MGMR”); in February 1994, he was appointed as Secretary of CPC Committee and Deputy Director General of Bureau of Petroleum Geology and Marine Geology, MGMR; in JuneDecember 1997, he was appointed as Deputy Secretary of CPC Leading Group and Executive Vice President of Sinopec Star Petroleum Co., Ltd.; in April 2000, he was appointed as Assistant to President of Sinopec Group Company and concurrently as President of Sinopec Star Petroleum Co., Ltd.; in August 2000, he was appointed concurrently as Secretary of CPC Committee of Sinopec Star Petroleum Co., Ltd.; in July 2001, he was appointed as Vice President of Sinopec Group Company;Yangzi
58
Petrochemical Corporation; in April 1998, he served as Board Director and Vice President of Yangzi Petrochemical Co., Ltd.; in July 2002, he served as Vice Chairman of Board of Directors, President of Yangzi Petrochemical Co., Ltd. and Board Director of Yangzi Petrochemical Corporation; in December 2003, he was appointed concurrentlyserved as Chairman of Sinopec International Petroleum Service Corporation; in January 2007, he was appointed concurrently as Chairman of Sinopec International Petroleum Exploration and Production Corporation; in May 2009, he was elected as Vice Chairman of the Board of Directors of Sinopec Corp.

Li Chunguang, aged 59, Director and President of Sinopec Corp. and Vice President of Sinopec Group Company. Mr. Li is a professor level senior engineer and with a university diploma. In August 1991, he was appointed as Vice President of Sinopec Sales Company North China Branch; in October 1995, he was appointed as Vice President of Sinopec Sales Company; in June 2001, he was appointed as President of Sinopec Marketing Co., Ltd.; in December 2001, he was appointed as Director General of Oil Product Sales Department of Sinopec Corp.; in April 2002 he was elected as Chairman of the Board of Directors and President of Sinopec MarketingYangzi Petrochemical Co., Ltd.; and concurrently as Chairman of Board of Directors of Yangzi Petrochemical Corporation; in April 2003,December 2004, he served concurrently as Chairman of Board of Directors of BASF-YPC Company Limited; in September 2005, he was appointed as Vice PresidentDeputy CFO of Sinopec Corp.; in November 2005, he was appointed as Vice President of Sinopec Group Company;Corp.; in May 2009,2006, he was electedserved as Board Director, Senior Vice President and CFO of Sinopec Corp.; in May 2013, he was elected as Director and President of Sinopec Corp.

Zhang Jianhua, aged 50, Director and Senior Vice President of Sinopec Corp. Mr. Zhang is a professor level senior engineer with a PhD degree. In April 1999, he was appointed as Vice President of Shanghai Gaoqiao Petrochemical Company of Sinopec Group Company; in February 2000, he was appointed as Vice President of Sinopec Shanghai Gaoqiao Company; in September 2000, he was appointed as President of Sinopec Shanghai Gaoqiao Company; in April 2003, he was appointed as Vice President of Sinopec Corp.; in November 2003, he was appointed concurrently as Director General of Production and Operation Management Department of Sinopec Corp.; in March 2005, he was appointed as Senior Vice President of Sinopec Corp.; in June 2007,August 2012, he was appointed concurrently as Chairman of Sinopec (Hong Kong)Great Wall EC Energy & Chemical Co., Ltd;Ltd.; in October 2014,March 2013, he was appointed concurrently as Chairman of Sinopec Engineering (Group)Catalyst Co., Ltd.; and in May 2006,2009, he was elected as Board Director and appointed as Senior Vice President of Sinopec Corp. Since May 2016, Mr. Dai served as President of China Petrochemical Corporation and since August 2016, he was elected as the Vice Chairman of the Board and appointed as President of Sinopec Corp.

58

Wang Zhigang, aged 57,59, Board Director and Senior Vice President of Sinopec Corp. Mr. Wang is a professor level senior engineer with a PhDPh.D. Degree. In February 2000, he was appointed as Vice President of Sinopec Shengli Oilfield Co., Ltd.; in June 2000, he served as Board Director and President of Shengli Oilfield Co., Ltd.; in November 2001, he was appointed temporallytemporarily as Deputy Director General and Deputy Secretary of CPC Leading Party Member Group of Economic and Trade Commission, Ningxia Hui Autonomous Region; in April 2003, he was appointed as Vice President of Sinopec Corp.; in June 2003, he was appointed concurrently as Director General of Exploration and Production Department of Sinopec Corp.; in March 2005, he was appointed as Senior Vice President of Sinopec Corp.; in January 2007, he was appointed concurrently as Vice Chairman of Sinopec International Petroleum Exploration and Production Corporation; in September 2014, he was appointed concurrently as Chairman of the Board of Directors of Sinopec International Petroleum Exploration and Production Corporation; and in May 2006, he was elected as Board Director and appointed as Senior Vice President of Sinopec Corp.

Cao Yaofeng, Zhang Haichao, aged 61, Director of Sinopec Corp. Mr. Cao is a professor level senior engineer with a master degree. In April 1997, he was appointed as Deputy Director General of Shengli Petroleum Administration; in May 2000, he served as concurrently as Vice Chairman of the59, Board of Directors of Sinopec Shengli Oilfield Co., Ltd.; in December 2001, he served as Director and President of Sinopec Shengli Oilfield Co., Ltd.; in December 2002, he served as Director General of Shengli Petroleum Administration of Sinopec Group Company and Chairman of the Board of Directors of Sinopec Shengli Oilfield Company Limited; from April 2003 to May 2006, he served as Employee Representative Director of Sinopec Corp.; in October 2004, he was appointed as Assistant to President of Sinopec Group Company; in June 2012, he was appointed concurrently as Chairman of Sinopec Oilfield Service Corporation; in 2013, he was appointed as academician of Chinese Academy of Engineering; and in May 2009, he was elected as Director of Sinopec Corp.

Dai Houliang, aged 51, Director and Senior Vice President of Sinopec Corp. Mr. DaiZhang is a professor level senior economist with a master degree. In March 1998, he was appointed as Vice President of Zhejiang Petroleum Corporation; in September 1999, he was appointed as President of Zhejiang Petroleum Corporation; in February 2000, he was appointed as President of Sinopec Zhejiang Petroleum Co., Ltd.; in April 2003, he was elected as Employee’s Representative Supervisor of Sinopec Corp.; in April 2004, he served as Chairman of Board of Directors of Sinopec-BP Zhejiang Petroleum Sales Co., Ltd.; in October 2004, he served as Secretary of CPC Committee, Vice Chairman of Board of Directors, and Vice President of Sinopec Sales Co., Ltd.; in November 2005 he served as Vice President of Sinopec Corp., Secretary of CPC Committee, Chairman of Board of Directors, and President of Sinopec Sales Co., Ltd.; in June 2006, he served as Chairman of Board of Directors, and President of Sinopec Sales Co., Ltd.; in July 2014, he was appointed as Vice President of China Petrochemical Corporation; and in May 2015, he was elected as Board Director and Senior Vice President of Sinopec Corp.

Jiao Fangzheng, aged 54, Board Director and Senior Vice President of Sinopec Corp. Mr. Jiao is a professor level senior engineer with a PhDPh.D. degree. In December 1997,January 1999, he was appointed as Chief Geologist in Zhongyuan Petroleum Exploration Bureau of China Petrochemical Corporation; in February 2000, he was appointed as Vice President and Chief Geologist of Yangzi Petrochemical Corporation; in April 1998, he served as Director and Vice President of Yangzi Petrochemical Co., Ltd.;Sinopec Zhongyuan Oilfield Company; in July 2002, he served as Vice Chairman of the Board of Directors, President of Yangzi Petrochemical Co., Ltd. and Director of Yangzi Petrochemical Corporation; in December 2003, he served as Chairman of the Board of Directors and President of Yangzi Petrochemical Co., Ltd. and concurrently as Chairman of the Board of Directors of Yangzi Petrochemical Corporation; in December 2004, he served concurrently as Chairman of the Board of Directors of BASF-YPC Company Limited; in September 2005, he was appointed as Deputy Chief Financial Officer of Sinopec Corp.; in November 2005, he was appointed as Vice President of Sinopec Corp.; in May 2006, he served as Director, Senior Vice President and Chief Financial Officer of Sinopec Corp.; in August 2008, he was concurrently appointed as the Chairman of Petro-Cyberworks Information Technology Co., Ltd. (PCITC) and Sinopec Technology Development Company; in August 2012, he was appointed concurrently as Chairman of Sinopec Great Wall Energy & Chemical Co., Ltd.; in March 2013, he was appointed concurrently as Chairman of Sinopec Catalyst Co., Ltd.; and in May 2009, he was elected as Director and appointed as Senior Vice President of Sinopec Corp.

Liu Yun, aged 58, Director of Sinopec Corp., Chief Accountant of Sinopec Group Company. Mr. Liu is a professor level senior accountant with a master degree. In December 1998, he was appointed as Deputy Director General of Finance Department of Sinopec Group Company; in February 2000, he was appointed as Deputy Director General of Finance Department of Sinopec Corp.;Petroleum Exploration & Development Research Institute; in JanuaryMarch 2001, he was appointed as Deputy Director General of Finance Department of Sinopec Corp.;Exploration & Production Department; in June 2006, he was appointed as Deputy Chief Financial Officer of Sinopec Corp.; in February 2009, he was appointed as Chief Accountant of Sinopec Group Company; and in May 2012, he was appointed concurrently as the Chairman of Sinopec Finance Co., Ltd.; in September 2013, he was appointed concurrently as Chairman of Sinopec Insurance Co., Ltd.; and in May 2009, he was elected as Director of Sinopec Corp.

Chen Xiaojin, aged 70, Independent Non-executive Director of Sinopec Corp. Mr. Chen is a senior engineer (research fellow level) with a university diploma. In December 1982,2004, he was appointed as President of Tianjin Shipbuilding Industry Corporation;Sinopec Northwest Oilfield Company; in January 1985,October 2006, he was appointed successively as Vice President and President of CNOOC Platform Corporation;Sinopec Corp. in February 1987,July 2010, he was appointed successively as the Director General of Operation Department, Director General of Foreign Affairs Bureau, Director General of International Affairs DepartmentSinopec Exploration & Production Department; in China State Shipbuilding Corporation and Deputy President of China State Shipbuilding Trading Company; in December 1988,July 2014, he was appointed as Vice President of China State ShipbuildingPetrochemical Corporation; in January 1989,September 2014, he was appointedelected concurrently as PresidentChairman of China State Shipbuilding Trading Company;Board of Directors of Sinopec Oilfield Service Co. Ltd and Vice Chairman of Board of Directors of Sinopec International Petroleum Exploration and Production Corporation; and in October 1996,May 2015, he was elected as concurrently as Chairman of the Board of Directors of China State Shipbuilding Trading Company; from June 1999 to July 2008, he served asDirector and Senior Vice President and Secretary of CPC Leading Group of China State Shipbuilding Corporation; in May 2009, he was elected as Independent Non-executive Director of Sinopec Corp.

Ma Weihua,Yongsheng, aged 66, Independent Non-executive55, Board Director and Senior Vice President of Sinopec Corp. Mr. Ma is a professor level senior economistengineer with a PhD degree. Mr. Ma is the ChairmanPh.D. degree and an academician of the BoardChinese Academy of Directors of Wing Lung Bank Ltd., Independent Non-executive Director of Winox Holdings Ltd., Independent Director of the Guotai Junan Securities Co., Ltd. (GTJA), Independent Director of China Eastern Airlines Corporation Limited, Independent Director of China Resource Land Limited,

59

Independent Director of Huabao Investment Co., Ltd., and Independent Director of China World Trade Co., Ltd.Engineering. In May 1988,April 2002, he was appointed as the Deputy DirectorChief Geologist of the General Affairs Office of the People’s Bank of China (“PBOC”);Sinopec Southern Exploration and Production Company; in March 1990,April 2006, he was appointed as theExecutive Deputy DirectorManager (in charge of Fund Planning Departmentoverall management), Chief Geologist of PBOC;Sinopec Southern Exploration and Production Company; in October 1992,January 2007, he was appointed as the PresidentManager and Party Secretary of the CPC Leading GroupSinopec Southern Exploration and Production Branch; in March 2007, he served as General Manager and Deputy Party Secretary of the Hainan Branch of PBOC;Sinopec Exploration Branch; in January 1999,May 2007, he was appointed as the Director, GovernorDeputy Commander of Sichuan-East China Gas Transmission Construction Project Headquarter of Sinopec Corp., General Manager and Deputy Secretary of the CPC Committee of China Merchants Bank; andSinopec Exploration Branch; in May 2008, he was appointed as Deputy Director General of Exploration and Production Department of Sinopec Corp. (Director General Level) and Deputy Commander of Sichuan-East China Gas Transmission Construction Project
59
Headquarter; in July 2010, he served as Deputy Chief Geologist of Sinopec Corp.; in August 2013, he was appointed as Chief Geologist of Sinopec Corp.; in February 2016, he was elected as Independent Non-executiveBoard Director of Sinopec Corp., and in December 2015, he served as Vice President of China Petrochemical Corporation and appointed as Senior Vice President of Sinopec Corp. In February 2016, he was eleced as Director of Sinopec Corp.

Jiang Xiaoming, aged 61,63, Independent Non-executive Director of Sinopec Corp. Mr. Jiang has a doctorate in economics. Presently, he acts as the member of the national committee of CPPCC, director of China Foundation for Disabled Persons, member of the United Nations Board of Investment, Chairman of the Board of Directors of Hong Kong Saibo International Co., Ltd., Independent Director of COSCO International, and SPG Land (Holdings) Ltd., Senior Fellow of the University of Cambridge Business School, and trustee of University of Cambridge China Development Fund. Between 1992 and 1998, he acted as the Vice President of United Nations Staff Retirement Fund; between 1999 and 2003, he acted as the Chairman of the Board of Directors of Frasers Property (China) Co., Ltd.; and he has previously acted as the Board Director of JSW Energy Ltd., member of the Advisory Committee of American Capital Group and Rothschild, the British Investment Bank, and Independent Director of China Oilfield Services Co., Ltd. From May 2012 to the present, he has acted as Independent Non-executive Director of Sinopec Corp.

Andrew Y. Yan, aged 57,59, Independent Non-executive Director of Sinopec Corp. Mr. Yan is the founding Managing Partner of SAIF PartnersPartners. He studied in Nanjing University of Aeronautics and hasAstronautics, Peking University and Princeton University and earned a master degree.master’s degree from Princeton University. Presently, he acts as the Independent Non-executive Director of China Resources Land Limited, CPMC Holdings Limited and Cogobuy Group, the Non-executive Director of Digital China Holdings Limited, China Huiyuan Juice Group Limited, Feng Deli Holdings Limited and Guodian Technology & Environment Group Corporation Limited; the Independent Director of Beijing BlueFocus Brand Management Consulting Co,Co., Ltd, TCL Group and Sky Solar Holdings Ltd.; and the Director of ATA Co., Ltd. From 1989 to 1994, he acted as the Economist of the World Bank headquarters in Washington, Senior Fellow of Hudson Institute, an American famous research think tank, and acted as the director of APAC Strategic Planning & Business Development of Sprint International Corporation; between 1994 and 2001, he acted as the Managing Director (Emergingof Emerging Markets Partnership)Partnership and Director of Hong Kong Office of AIG Asia Infrastructural Investment Fund. And from May 2012 to the present, he has acted as Independent Non-executive Director of Sinopec Corp.

Bao Guoming, Tang Min, aged 63, Independent Non-executive Director of Sinopec Corp. Ms. Bao isMr. Tang has a Professor,doctorate in economics. He presently acts as a Counsellor of the State Council of the PRC and the Executive Vice Chairman of YouChange China Social Entrepreneur Foundation, Independent Director of Minmetals Development Co., an international registered internal auditor and Certified Public Accountant of China with a master degree. Since December of 1992, she acted as associate professor of Accounting Department of International Business School of Nankai University, and since December of 1995, as Professor of Accounting Department of International Business School of Nankai University; since November of 1997,Ltd, Origin Agritech Limited. He has served as the Vice Director of Accounting Department of International Business School of Nankai University; since April of 1999, aseconomist and senior economist at the Vice DirectorEconomic Research Centre of the Audit Cadre Training Center of National Audit Office; since February of 2003, asAsian Development Bank between 1989 and 2000; chief economist at the DirectorRepresentative office of the Audit Cadre Training Center of National Audit Office; since July of 2004, asAsian Development Bank in China between 2000 and 2004; deputy representative at the DirectorRepresentative Office of the Administrative Audit Department of National Audit Office; since February of 2010, asAsian Development Bank in China between 2004 and 2007 and the Director-Level Auditordeputy secretary-general of the LawsChina Development Research Foundation between 2007 and Regulations Department of National Audit Office; since July of 2010, as the Vice-Chairman and Secretary General of China Internal Audit Association.2010. From May 20122015 to the present, shehe has acted as Independent Non-executiveDirector of Sinopec Corp.

Fan Gang, aged 62, Independent Director of Sinopec Corp. Ms. BaoMr. Fan has a doctorate in economics. He presently acts as Vice President of China Society of Economic Reform, President of China Reform Foundation, Head of the National Economic Research Institution, President of China Development Institute (Shenzhen) and an economics professor at Peking University. He began to work for Chinese Academy of Social Sciences in 1988, and subsequently served as Director of Editorial Department for the Economic Research Journal between 1992 and 1993 and as Deputy Head of the Institute of Economics Chinese Academy of Social Sciences between 1994 and 1995. In 1996, he was redesignated to work for China Society of Economic Reform, and subsequently founded the National Economic Research Institution. From 2006 to 2010, and from 2015 to the present, he has served as a member of the Monetary Policy Committee of People’s Bank of China. Mr. Fan is an expert who enjoysrecognised as one of the State Council Special Allowance.National Young and Middle-Aged Experts with Outstanding Contributions. From May 2015 to the present, he has acted as Independent Director of Sinopec Corp.

Supervisors
The table and discussion below set forth certain information concerning our supervisors. The current term of our supervisors is three years, which will expire in May 2015.2018.
Name
Age
Age
Position with the Company
Xu BinLiu Zhongyun58Chairman of the Board of Supervisors
Geng Limin6053Supervisor
Li XinjianZhou Hengyou6153Supervisor
Zou Huiping5654Supervisor
Kang Mingde64Independent Supervisor
Zhou Shiliang57Employee Representative Supervisor
Chen Mingzheng57Employee Representative Supervisor
Jiang Zhenying5052Employee Representative Supervisor
Yu Renming5351Employee Representative Supervisor
Wang Yajun60Employee Representative Supervisor

60

Xu Bin, Liu Zhongyun, aged 58, Chairman of the Board of Supervisors53, Supervisor of Sinopec Corp. Mr. XuLiu is a professor level senior administration engineer with a university diploma. Since June 1999, he acted as Deputy Director of the 6th Discipline Inspection and Monitoring Office of the Central Commission for Discipline Inspection of CPC; since April 2000, as Deputy Director of the 3rd Discipline Inspection and Monitoring Office of CCDI of CPC; since November 2004, as the Bureau Level Inspector, Supervisory Attaché and Deputy Director of the 3rd Discipline Inspection and Monitoring Office of the Central Commission for Discipline Inspection of CPC; since November 2006, as the Director of the Petition Letters and Visits Office of Central Commission for Discipline Inspection of CPC; since May 2011, as the Member of the CPC Leading Group of Sinopec Group Company and the Team Leader of the Discipline Inspection Group for CPC Leading Group of Sinopec Group Company; and since October 2011, as the Director of Sinopec Group Company. And since May 2012, he has acted as the Chairman of the Board of Supervisors of Sinopec Corp.

Geng Limin, aged 60, Supervisor of Sinopec Corp., Director General of Supervision Department of Sinopec Corp. Mr. Geng is a professor level senior administration engineer with a college diploma.doctorate in engineering. In February 2000,December 2002, he was appointed as Deputya standing committee member of CPC Committee and Director General of SupervisionOrganisation Department of Sinopec Corp. and Deputy Director General of Supervision Bureau of Sinopec Group Company;Shengli Petroleum Administration Bureau; in January 2007,November 2004, he was appointed as Deputy Secretary of CPC Committee Secretary of Discipline Inspection CommitteeShengli Petroleum Administration Bureau; in December 2005, he was appointed as well as Labour Union ChairmanManager of Sinopec Chemical Products Sales Company;Shengli Oilfield Branch; in AugustDecember 2008, he was appointed as Secretary of CPC Committee of Sinopec International Petroleum Exploration and Production Corporation; in July 2010, he was appointed as General Manager of Sinopec Northwest Oilfield Company, Director General of Supervision Department of Sinopec Corp. and Vice Leader of Discipline Inspection Group for CPC Leading Group of Sinopec Group CompanyNorthwest Petroleum Bureau under China Petrochemical Corporation. Since August 2014, Mr. Liu has acted as Assistant to President and Director General of Supervision BureauHR Department of Sinopec Group Company;China Petrochemical Corporation, and in May 2009,2015, he was elected as Supervisor of Sinopec Corp.

Li Xinjian, Zhou Hengyou, aged 61,53, Supervisor of Sinopec Corp. Mr. LiZhou is a professor level senior administration engineer withand a university diploma.postgraduate. In December 1998, Mr. Zhou was appointed as a standing committee member of CPC Committee and Deputy Labour Union Chairman of Jiangsu Petroleum Exploration Bureau; in February 2001,1999, he was appointed as Directora standing committee member of General OfficeCPC Committee and Assistant InspectorLabour Union Chairman of Leading GroupJiangsu Petroleum Exploration Bureau of PromotionChina Petrochemical Corporation; in December 2002, he was appointed as Deputy Secretary of CulturalCPC Committee and Ideological Progress Central OfficeLabour Union Chairman of the CPC Central Committee;Jiangsu Petroleum Exploration Bureau; in June 2004, he was appointed as Deputy Secretary of Central Office of CPC Central Committee and DirectorSecretary of General OfficeSupervisory Committee of Leading Group of Promotion of Cultural and Ideological Progress Central Office of the CPC Central Committee;Jiangsu Petroleum Exploration Bureau; in January 2006, he was appointed concurrently as Deputy Director General of HR Department of the Central Office of the CPC Central Committee; and in March 2008,August 2005, he was appointed as DeputySecretary of CPC Committee of Jiangsu Petroleum Exploration Bureau; in March 2011,he was appointed as Director General and Secretary of CPC Committee of China Petrochemical News. In March 2015, he was appointed as Director General of the General Office of Sinopec Group CompanyChina Petrochemical Corporation, Director General of Policy Research Department of the General Office and Deputy Director General of President Office of Sinopec Corp. (DirectorIn August 2015, he was appointed as Director General Level). Inof Board of Directors Office under China Petrochemical Corporation; and in May 2012,2015, he was elected as Supervisor of Sinopec Corp.

Zou Huiping, aged 54,56, Supervisor of Sinopec Corp. and Director General of Auditing Department of Sinopec Corp. Mr. Zou is a professor level senior accountant with a university diploma. In November 1998, he was appointed as Chief Accountant in Guangzhou Petrochemical General Plant of Sinopec Group Company;China Petrochemical Corporation; in February 2000, he was appointed as Deputy Director General of Finance & Assets Department of Sinopec Group Company;China Petrochemical Corporation; in December 2001, he was appointed as Deputy Director General of Finance & Planning Department of Sinopec Group Company;China Petrochemical Corporation; in March 2006, he was appointed as Director General of Finance & Assets Department of Assets Management Co., Ltd. of Sinopec Group Company;China Petrochemical Corporation; in March 2006, he was appointed as Director General of Auditing Department of Sinopec Corp.; and in May 2006, he was elected as Supervisor of Sinopec Corp.

Kang Mingde,Jiang Zhenying, aged 64, Independent Supervisor of Sinopec Corp., Mr. Kang obtained a college diploma. Since January 1992, he worked in the 6th Discipline Inspection Office of CPC Central Commission for Discipline Inspection and Ministry of Supervision, and was appointed as officer (deputy director level) Deputy Director, director, Inspector (Deputy Director General level), and Supervision Commissioner; since January 2005, he was appointed as the Discipline Inspector (Deputy Director General level) and Supervision Commissioner of the first Discipline Inspection Office of CPC Central Commission for Discipline Inspection and Ministry of Supervision; between November 2010 and July 2011, he was appointed as the Discipline Inspector (Director level) and Supervision Commissioner of the first Discipline Inspection Office of CPC Central Commission for Discipline Inspection and Ministry of Supervision; and in May 2012, he was elected as Supervisor of Sinopec Corp.

Zhou Shiliang, aged 57, Employees’52, Employee’s Representative Supervisor of Sinopec Corp. Mr. Zhou is a professor level senior engineer with a master degree. In February 2000, he was appointed as Deputy Director General of Yunnan-Guizhou-Guangxi Petroleum Exploration Bureau; in September 2000, he was appointed as President of Sinopec Yunnan-Guizhou-Guangxi Oilfield Company; in April 2002, he was appointed as Secretary of CPC Committee and Vice President in Sinopec South Exploration & Production Company; in April 2006, he was appointed as Secretary of CPC Committee and Deputy Director General in Sinopec Henan Petroleum Exploration Bureau; in November 2007, he was appointed as Director General of HR Department of Sinopec Corp.; since June 2012, he has acted as the Secretary of CPC Committee and Supervisory Committee, Chairman of the Labour Union and Supervisory Board of Sinopec Oilfield Service Corporation; in September 2014, he was appointed as the Secretary of CPC Committee, Director and Vice President of Sinopec Oilfield Service Co., Ltd.; and in May 2009, he was elected as Employees’ Representative Supervisor of Sinopec Corp.

61

Chen Mingzheng, aged 57, Employees’ Representative Supervisor of Sinopec Corp., Vice President of Sinopec Northwest Oilfield Company. Mr. Chen is a senior engineer with a graduate degree from graduate school. In November 2000, he was appointed as Deputy Director General of North China Petroleum Bureau under Sinopec Star Petroleum Co., Ltd.; in June 2003, he was appointed as Deputy Director General of North China Petroleum Bureau under Sinopec Group Company; in October 2004, he was appointed as Secretary of CPC Committee in North China Petroleum Bureau under Sinopec Group Company; in March 2008, he was appointed as Secretary of CPC Committee of Sinopec Northwest Bureau and Vice President of Sinopec Northwest Oilfield Company; in March 2014, he was appointed concurrently as Chairman of the Board of Supervisors of Xinjiang Energy Chemical Industry Co., Ltd.; in September 2014, he was appointed as President, Vice Secretary of CPC Committee of Sinopec Northwest Bureau and President of Sinopec Northwest Oilfield Company; in May 2009, he was elected as Employees’ Representative Supervisor of Sinopec Corp.

Jiang Zhenying, aged 50, Employees’ Representative Supervisor of Sinopec Corp., General Director, Executive Director and Deputy Secretary of CPC Committee of Sinopec Procurement Management Department, and President of China Petrochemical International Co., Ltd. Mr. Jiang is a professor level senior economist with a doctor degree. In December 1998, he was appointed as the Vice President of the China Petrochemical Supplies & Equipment Co., Ltd.; in February 2000, he was appointed as the Deputy Director General of Sinopec Procurement Management Department; in December 2001, he was appointed as the Director General of Sinopec Procurement Management Department and in November 2005 he concurrently held the positions of Chairman of the Board of Directors, President and Secretary of CPC Committee of China Petrochemical International Co., Ltd.; in March 2006, he was appointed as the Director General (General Manager), Executive Director and Secretary of the CPC Committee of Sinopec Procurement Management Department President of China Petrochemical(Sinopec International Co., Ltd.); in April 2010, he was appointed as the Director General (General Manager), Executive Director and Deputy Secretary of the CPC Committee of Sinopec Procurement Management Department and President of China Petrochemical(Sinopec International Co., Ltd. Ltd); in November 2014, he was appointed as Director General of Security Management Department of Sinopec Corp.;and in December 2010, he was elected as the Employees’Employee’s Representative Supervisor of Sinopec Corp.

Yu Renming, aged 51, Employees’53, Employee’s Representative Supervisor of Sinopec Corp., Director General of Sinopec Production Management Department. Mr. Yu is a professor level senior engineer with a university degree.diploma. In June 2000, he was appointed as the Vice PresidentDeputy General Manager of Sinopec Zhenhai Refining & Chemical Co., Ltd.; in June 2003, he was appointed as the Board Director and Vice PresidentDeputy General Manager of Sinopec Zhenhai Refining & Chemical Co., Ltd.; in September 2006, he was appointed as the Vice President of Sinopec Zhenhai Refining & Chemical Company; in September 2007, he was appointed as the President and the Vice Secretary of CPC committee of Sinopec Zhenhai Refining & Chemical Company; in January 2008, he was appointed as the Director General of Sinopec Production Management Department; in May 2014, he was elected as Director General of the Production Dispatch Center of Sinopec Corp.; and in December 2010, he was elected as Employees’Employee’s Representative Supervisor of Sinopec Corp.

Wang Yajun, aged 60, Empolyee’s Representative Supervisor of Sinopec Corp. Mr. Wang is a professor level senior administration engineer with a university diploma. In December 2004, he was appointed as Vice Secretary of CPC committee, Secretary of Discipline Inspection Committee and Labour Union Chairman of Zhongyuan Petroleum Exploration Bureau of China Petrochemical Corporation. In November 2010, he was appointed as Party Secretary of CPC
61
committee, of Zhongyuan Petroleum Exploration Bureau. In March 2015, Mr. Wang was appointed as Secretary of CPC of China Sinopec International Petroleum Exploration and Development Co., Ltd; and in May 2015, he was elected as Employee’s Representative Supervisor of Sinopec Corp.

Other Executive Officers
Name
Age
Age
Positions with Sinopec Corp.
Zhang Haichao57Vice President
Jiao Fangzheng52Vice President
Wang XinhuaDehua50    59Chief Financial OfficerCFO
Lei DianwuJiang Zhenghong5255Vice President
Ling Yiqun5254Vice President
Jiang ZhenghongHuang Wensheng5053Vice President/Secretary to the Board of Directors
Chang Zhenyong58Vice President
Chang Zhenyong(1)
56Vice President
Huang Wensheng(1)
48Secretary of the Board of Directors/Vice President
Wang Yongjian(2)
Lei Dianwu54Vice President
(1) In May 2014, Mr. Chang Zhenyong and Mr. Huang Wensheng were appointed Vice Presidents of Sinopec Corp.
(2) In August 2014, Mr. Wang Yongjian tendered his resignation as Vice President of the Sinopec Corp. due to work-related reasons.

Wang DehuaZhang Haichao, , aged 57, Vice President of Sinopec Corp, Chairman of the Board of Directors and President of Sinopec Marketing Co., Ltd., Vice President of Sinopec Group Company. Mr. Zhang is a professor level senior economist with a master degree. In March 1998, he was appointed as Vice President of Zhejiang Petroleum Corporation; in September 1999, he was appointed as President of Zhejiang Petroleum Corporation; in February 2000, he was appointed as President of Sinopec Zhejiang Petroleum Co., Ltd.; in April 2004, he served as Chairman of the Board of Directors of Sinopec-BP Zhejiang Petroleum Sales Co., Ltd.; in April 2003, he was elected as Employee’s Representative Supervisor of Sinopec Corp.; in October 2004, he served as Secretary of CPC Committee, Vice Chairman of the Board of Directors, and Vice President of Sinopec Marketing Co., Ltd.; in November 2005 he served as Secretary of CPC Committee, Chairman of the Board of Directors, and President of Sinopec Marketing Co., Ltd.; in June 2006, he served as Chairman of the Board of Directors, and President of Sinopec Marketing Co., Ltd.; and in November 2005, he was appointed as Vice President of Sinopec Corp.

62

Jiao Fangzheng, aged 52, Vice President of Sinopec Corp., Vice President of Sinopec Group Company, Director General of Sinopec Exploration and Production Department. Mr. Jiao is a professor level senior engineer with a PhD degree. In January 1999, he was appointed as Chief Geologist in Zhongyuan Petroleum Exploration Bureau of Sinopec Group Company; in February 2000, he was appointed as Vice President and Chief Geologist of Sinopec Zhongyuan Oilfield Company; in July 2000, he was appointed as Deputy Director General of Sinopec Petroleum Exploration & Development Research Institute; in March 2001, he was appointed as Deputy Director General of Sinopec Exploration & Production Department; in June 2004, he was appointed as President of Sinopec Northwest Oilfield Company; in July 2010, he was appointed as the Director General of Sinopec Exploration & Production Department; in July 2014, he was appointed as Vice President of Sinopec Group Company; in September 2014, he was elected concurrently as Chairman of the Board of Directors of Sinopec Oilfield Service Co., Ltd. and Vice Chairman of the Board of Directors of Sinopec International Petroleum Exploration and Production Corporation; in February 2015, he was elected as Chairman of the Board of Directors of Sinopec Yizheng Chemical Fiber Company (YCF) and in October 2006, he was appointed as Vice President of Sinopec Corp.
Wang Xinhua, aged 59,50, Chief Financial Officer of Sinopec Corp. Mr. Wang is a professor level senior accountant with a university diploma. In January 2001, he was appointed as Deputy Director General of Finance & Assets Department of Sinopec Groupthe Company; in December 2001,May 2014, he was appointed as DeputyActing Director General of Finance & Planning Department of Sinopec Groupthe Company; in October 2004,2015, he was appointed aspromoted to Director General of Finance & Planning Department of Sinopec Group Company;Corp.; in May 2008,November 2015, he was appointed as Director General of Finance Department of Sinopec Group Company;China Petrochemical Corporation; in March 2009,August 2016, he was appointed as Director General of Finance Department of the Company. Mr. Wang now concurrently acts as Chairman of Sinopec Corp.; in May 2009,Century Bright Capital Investment Limited and Sinopec Insurance Co., Ltd., and Director of Sinopec Qingdao Petrochemical Company Limited. He also serves as Supervisor of Sinopec Catalyst Co., Ltd., and Vice Chairman of Taiping & Sinopec Financial Leasing Co., Ltd. In September 2016, he was appointed as Chief Financial Officer of Sinopec Corp.
 
Lei Dianwu, Jiang Zhenghong, aged 52,55, Vice President of Sinopec Corp. Mr. LeiJiang is a Professorprofessor level Senior Engineersenior economist with a university diploma.doctor degree. In October 1995,September 2000, he became Vice President of Shanghai Gaoqiao Petrochemical Co., Ltd. and Sinopec Shanghai Gaoqiao Company; in September 2001, he was appointed as Vice President of Yangzi Petrochemical Corporation; in December 1997, he was appointed as Director General of Planning & Development Department in China Eastern United Petrochemical (Group) Co., Ltd.; in May 1998, he was appointed as Vice President of Yangzi Petrochemical Corporation; in August 1998 he was appointed as Vice President of YangziShanghai Gaoqiao Petrochemical Co., Ltd.; in March 1999, he was appointed temporarily as Deputy Director General of Development & Planning Department of Sinopec Group Company; in February 2000,April 2006, he was appointed as Deputy Director GeneralSecretary of Development & Planning DepartmentCPC Committee and Vice President of Sinopec Corp.;Zhenhai Refining & Chemical Company; in March 2001,September 2006, he was appointed as Director GeneralSecretary of Development & Planning DepartmentCPC Committee and Vice President of Zhenhai subsidiary of China Petrochemical Corporation; in March 2008, he was promoted to President and Secretary of CPC Committee of Sinopec Corp.;Zhenhai Refining & Chemical Company; in March 2009,July 2010, he was appointed as Assistant to President and Deputy Secretary of CPC Committee of Sinopec GroupZhenhai Refining & Chemical Company; in August 2013, he was appointed as the Chief EconomistDirector General of Sinopec Group Company; andCorporate Reform Dept.; in May 2009,September 2013, he was appointed as Vice President of Sinopec Corp.

Ling Yiqun, aged 52,54, Vice President of Sinopec Corp. and President of Sinopec Qilu Company. Mr. Ling is a professor level senior engineer with a master degree. From 1983, he worked in the refinery of Beijing Yanshan Petrochemical Company and the Refining Department of Beijing Yanshan Petrochemical Company Ltd. In February 2000, he was appointed as the Deputy General Director of Refining Department of Sinopec Corp.; in June 2003, he was appointed as the Director General of Refining Department of Sinopec Corp.; in May 2012, he was appointed as Executive Director, President and Secretary of CPC Committee of Sinopec Refinery Product Sales Company Limited; in August 2013, he was appointed as the President of Sinopec Qilu Company; in July 2010, he was appointed as Vice President of Sinopec Corp.

Jiang Zhenghong, Huang Wensheng, aged 53,50, Vice President of Sinopec Corp., Director General of Department of Corporate Reform of Sinopec Corp. Mr. Jiang is a professor level senior economist with a doctor degree. In September 2000, he became Vice President of Shanghai Gaoqiao Petrochemical Co., Ltd. and Sinopec Shanghai Gaoqiao Company; in September 2001, he was appointed as President of Shanghai Gaoqiao Petrochemical Co., Ltd.; from April 2006, he was appointed as Secretary of CPC Committee and Vice President of Sinopec Zhenhai Refining & Chemical Company; from September 2006, he was appointed as Secretary of CPC Committee and Vice President of Zhenhai subsidiary of Sinopec Group Company; in March 2008, he was promoted to President and Secretary of CPC Committee of Sinopec Zhenhai Refining & Chemical Company; from July 2010, he was appointed as President and Deputy Secretary of CPC Committee of Sinopec Zhenhai Refining & Chemical Company; Since August 2013, he was appointed as the Director General of Sinopec Corporate Reform Department; since September 2013, he was appointed as Vice President of Sinopec Corp.

Chang Zhenyong, aged 56, Vice President of Sinopec Corp., Director General of Chemical Department of Sinopec Corp., Executive Director and President of Sinopec Chemical Products Sales Co., Ltd. Mr. Chang is a professor level senior engineer with a master’s degree. In September 1997, he was appointed as Vice President of Tianjin Petrochemical Company, Vice President and President of Sinopec Tianjin Company; from February 2004 to November 2005, he was

63

appointed temporally as Member, Standing Committee of CPC Committee and deputy mayor of Beihai, Guangxi; in November 2005, he was appointed as Director General of Production and Operation Management Department of Sinopec Corp.; in December 2007, he was appointed President and Deputy Secretary of CPC Committee of Qilu Petrochemical Company and President of Sinopec Qilu Company; from April 2010 to December 2010, he was appointed as Employee-Representative Supervisor of Sinopec Corp.; in July 2010, he was appointed as Deputy Chief Engineer and concurrently as Director General of Chemicals Department of Sinopec Corp.; in August 2012, he was appointed concurrently as Director of Sinopec Xinjiang Energy Chemical Industry Co., Ltd., Vice Chairman of the Board of Directors of Sinopec Great Wall Energy & Chemical Co., Ltd. and Vice Chairman of the Board of Directors of Zhongtian Hechuang Energy Co., Ltd.; in November 2014, he was appointed as Executive Director and President of Sinopec Chemical Products Sales Co., Ltd. and concurrently as Chairman of the Board of Directors of Sinopec Chemical Products Sales (Hong Kong) Co., Ltd.; and in May 2014, he was appointed as Vice President of Sinopec Corp.

Huang Wensheng, aged 48, Vice President of Sinopec Corp., Secretary to the Board of Directors and Director General of the Board Secretariat of Sinopec Corp.Directors. Mr. Huang is a professor level senior economist with a university diploma. In March 2003, he was appointed as Deputy Director General of the Board Secretariat of Sinopec Corp.; in May 2006, he was appointed as Representative on Securities Matters of Sinopec Corp.; since August 2009, He has served as the Deputy Director General of President’s office of Sinopec Corp. In September 2009, he was appointed as Director General of the Board Secretariat of Sinopec Corp.; in May 2012, he was appointed as Secretary to the Board of Directors of Sinopec Corp.; and in May 2014, he was appointed as Vice President of Sinopec Corp.

B.COMPENSATION
Chang Zhenyong, aged 58, Vice President of Sinopec Corp. Mr. Chang is a professor level senior engineer with a master’s degree. In September 1997, he was appointed as Vice President of Tianjin Petrochemical Company; in February 2000, he was appointed as Vice President of Sinopec Tianjin Company; and in September 2000, he was promoted to President of Sinopec Tianjin Company; from February 2004, he was appointed temporarily as Standing Committee of CPC Committee of Beihai, Guangxi; in March 2004, he was appointed temporarily as deputy mayor of Beihai, Guangxi; in November 2005, he was appointed as Director General of Production and Operation Management Department of Sinopec Corp.; in December 2007, he was appointed as President of Qilu Petrochemical Company and President of Sinopec Qilu Company; in April 2010, he was appointed as Employee’s Representative Supervisor of Sinopec Corp.; in July 2010, he was appointed as Deputy Chief Engineer and

62
 

concurrently as Director General of Chemicals Department of Sinopec Corp.; in August 2012, he was appointed concurrently as Vice Chairman of Board of Directors of Sinopec Great Wall Energy & Chemical Co., Ltd.; in November 2014, he was appointed as Executive Director and President of Sinopec Chemical Products Sales Co. Ltd and concurrently as Chairman of Board of Directors of Sinopec Chemical Products Sales (Hong Kong) Co. Ltd.; and in May 2014, he was appointed as Vice President of Sinopec Corp.
Lei Dianwu, aged 54, Vice President of Sinopec Corp. Mr. Lei is a professor level senior engineer with a university diploma. In October 1995, he was appointed as Vice President of Yangzi Petrochemical Corporation; in December 1997, he was appointed as Director General of Planning & Development Department in China Eastern United Petrochemical (Group) Co., Ltd.; in May 1998, he was appointed as Vice President of Yangzi Petrochemical Corporation; in August 1998 he was appointed as Vice President of Yangzi Petrochemical Co., Ltd.; in March 1999, he was appointed temporarily as Deputy Director General of Development & Planning Department of China Petrochemical Corporation; in February 2000, he was appointed as Deputy Director General of Development & Planning Department of Sinopec Corp.; in March 2001, he was appointed as Director General of Development & Planning Department of Sinopec Corp.; in March 2009, he was appointed as Assistant to President of China Petrochemical Corporation; in August 2013, he was appointed as the Chief Economist of China Petrochemical Corporation; in October 2015, he was appointed as Secretary to the Board of Directors of China Petrochemical Corporation; and in May 2009, he was appointed as Vice President of Sinopec Corp.

B.          COMPENSATION
Salaries of Directors, Supervisors and Members of the Senior Management
Our directors and supervisors who hold working posts with us and other senior management members receive all their remunerationcompensation from us in cash. Our compensation committee, with assistances from relevant administrative departments, determines the formappropriate level of basicannual compensation for each of our directors and supervisors who hold working posts with us and other senior management members in two components: a base salary component and a performance rewards component.  The base salary component is a fixed amount that will be paid on monthly basis.  The performance rewards component is paid in one lump sum at about year end and the exact amounts of the performance rewards to be paid will be based on the completion by the Company of certain performance targets (key performance indicators, or KPIs) which are set at the beginning of the year and reviewed at year end.  The KPIs cover areas such as profitability, workplace safety and environmental protection.  Based on the annual review by our compensation committee, with the assistances from relevant administrative departments, of the Company’s completion of various KPIs, our directors and supervisors who hold working posts with us and other senior management members will receive full or partial payments as their performance rewards.
The following table sets forth the compensation on individual basis for our directors, supervisors and executive officers who received compensation from us in 2014.2016.
Name
 
Position with the Company
 
Remuneration paid by the Company in 2014
2016
    (RMB in thousands)thousands before tax)
Directors    
Fu ChengyuWang Yupu Chairman −—
Wang TianpuDai Houliang Vice Chairman,−
Zhang YaocangVice Chairman−
Li ChunguangDirector, President 972.9
Zhang JianhuaDirector, Senior Vice President974.9745.3
Wang Zhigang Director, Senior Vice President 974.9698.8
Cai Xiyou(1)
Zhang Haichao		 Director, Senior Vice President 867.0—
Cao YaofengDirector−
Dai HouliangJiao Fangzheng Director, Senior Vice President 969.1—
Liu YunMa Yongsheng Director, Senior Vice President −
Chen XiaojinIndependent Non-executive Director300.0
Ma WeihuaIndependent Non-executive Director300.0—
Jiang Xiaoming Independent Non-executive Director 300.0300
Andrew Y. Yan Independent Non-executive Director 300.0300
Bao GuomingTang Min Independent Non-executive Director 300.0300
Fan GangIndependent Director300
     
Supervisors    
Xu BinChairman of the Board of Supervisors−
Geng LiminLiu Zhongyun Supervisor −—
Li XinjianZhou Hengyou Supervisor −—
Zou Huiping Supervisor 552.7
Kang MingdeIndependent Supervisor−
Zhou ShiliangEmployee Representative Supervisor−
Chen MingzhengEmployee Representative Supervisor559.0618.2
Jiang Zhenying Employee Representative Supervisor 539.5618.2
Yu Renming Employee Representative Supervisor 598.2594.1
Wang YajunEmployee Representative Supervisor596.6

6463

NamePosition with the CompanyRemuneration paid by the Company in 2016
Other Executive officers    
Zhang HaichaoWang DehuaCFO133.8
Jiang Zhenghong Vice President 685.1
Jiao FangzhengVice President685.1
Wang XinhuaChief Financial Officer640.8
Lei DianwuVice President633.8704.2
Ling Yiqun Vice President 633.8709.6
Jiang ZhenghongVice President645.0
Chang Zhenyong(2)
Vice President
295.0(3)
Huang Wensheng(2)
 Secretary of the Board of Directors/Vice President 560.5702.0
Chang ZhenyongVice President709.6
Lei DianwuVice President709.6
____________________

(1)In October 2014, Mr. Cai Xiyou tendered his resignation as Director, member of the Strategy Committee of the Board and Senior Vice President of Sinopec Corp. due to new working arrangement.
(2)In May 2014, Mr. Chang Zhenyong and Mr. Huang Wensheng were appointed as Vice Presidents.
(3)Remuneration for Mr. Chang Zhenyong reflected the amount he received after being appointed as Vice President.
C.C.          BOARD PRACTICE
We have fourteenten directors. We have four special board committees, namely, the audit committee, the strategic committee, the remuneration and evaluation committee and social responsibility management committee. The majority of the members of the remuneration and evaluation committee and all members of the audit committee are independent directors. In addition, there is at least one independent director who is a financial expert in the audit committee.
The main responsibilities of the audit committee include:
·to propose the appointment or replacement of the independent auditor;
·to oversee the internal auditing system and its implementation;
·to coordinate the communication between the internal auditing department and the independent auditor;
·to examine and approve financial information and it disclosure; and
·to examine the financial policies, internal auditing, internal control and risk management system.
The members of our audit committee are Bao Guoming,Andrew Y. Yan, Jiang Xiaoming and Andrew Y. Yan,Tang Min, all of whom are our Independent Non-executive Directors. Our Board has determined that Bao GuomingAndrew Y. Yan qualifies as an audit committee financial expert.
The main responsibilities of the strategicstrategy committee are to conduct research and put forward proposals on the long-term development strategy and significant investments.
The members of our strategicstrategy committee are Fu Chengyu, Wang Tianpu, Li Chunguang, Ma Weihua, Zhang Jianhua,Yupu, Dai Houliang, Wang Zhigang, Dai Houliang, Jiang Xiaoming andZhang Haichao, Jiao Fangzheng, Ma Yongsheng, Andrew Y. Yan.
Yan and Fan Gang.
The main responsibilities of the remuneration and evaluationappraisal committee (remuneration committee) include:
·to researchreview evaluation standards on evaluation criteria forthe performance of directors and the president,senior management, to conduct their evaluations and make necessary suggestions;suggestions to the Board; and
·to research on and review thecompensation policies and scheme in respect of the remuneration of directors, supervisors and executive officers, and make necessary suggestions.suggestions to the Board.
The members of our remuneration and evaluation committee are Chen Xiaojin, Wang TianpuFan Gang, Dai Houliang and Bao Guoming.
Jiang Xiaoming.
The main responsibilities of the social responsibility management committee are to research on the policy, governance, strategy and planning for the Company’s social responsibility and put forward proposals to the Board. The members of social responsibility management committee are Fu Chengyu, Wang Tianpu, Li Chunguang, Chen XiaojinYupu, Dai Houliang and Ma Weihua.
65

Tang Min.
Our directors have entered into directors service contracts with us and under such contracts, there is no severance pay arrangements for our directors.
As a joint stock company incorporated in the PRC, we are required by the PRC law to have in place a board of supervisors.  The board of supervisors shall consist of no less than three supervisors, and at least one third of the board of supervisors
64
shall be employee representative supervisors.  Employee representative supervisors shall be elected by our employees at a meeting of employee representatives, a general meeting of employees or through other means.

According to our articles of association, the main responsibilities of our board of supervisors include:
·D.EMPLOYEESto review the Company’s financial affairs;
·to supervise directors and executive officers when they perform their duties, and to propose to our shareholders the dismissal of any director or executive officer who has violated our articles of association and relevant laws and regulation;
·to demand directors or executive officers to rectify their conducts that conflict with our interests;
·to propose the call of any extraordinary general meeting of shareholders to the Board, and to convene and preside over such shareholder meeting if the Board fails to do so; and
·to initiate legal proceedings against directors and executive officers on behalf of the Company.
Our board of supervisors currently consists of six supervisors including three employee representative supervisors. In 2016, the supervisors attended the Company’s shareholder meetings and presented at the Company’s board meetings, attended the trainings for directors and supervisors of listed companies organized by Beijing Securities Supervisory Bureau under CSRC.. A detailed report of our board of supervisors’ performance overview to our shareholders for the year 2016 was included in our annual report to shareholders, and could be found in the Section “Report of the Board of Supervisors” in our Form 6-K submitted to the Commission on April 7, 2017.
D.          EMPLOYEES
As of December 31, 2012, 20132014, 2015 and 2014,2016, we had approximately 376,201358,571, 351,019 and 368,953 and 358,571451,611 employees, respectively. The following table sets forth the number of our employees by our business segments, their scope of work and their education as of December 31, 2014.2016.
By Segment Number of Employees  Percentage of Total Number of Employees (%) 
Exploration and production  149,803   33 
Refining  72,473   16 
Marketing and distribution  153,924   34 
Chemicals  64,227   14 
Corporate and other  11,184   3 
Total  451,611   100 
         

By Employee’s Scope of Work Number of Employees  Percentage of Total Number of Employees (%) 
Production            173,105   38 
Sales            139,079   31 
Technical            77,531   17 
Finance            16,555   4 
Administration            26,538   6 
Others            18,803   4 
Total            451,611   100 
         

By Education Number of Employees  Percentage of Total Number of Employees (%) 
Master’s degree and above            15,210   3 
University            107,126   24 
Junior college            99,957   22 
Technical secondary school            41,079   9 
Senior high school and technical school degree or below  188,239   42 
Total            451,611   100 
         

By Segment
 
Number of Employees
 Percentage of Total Number of Employees (%)
Exploration and production 144,103 40
Refining 78,725 22
Marketing and distribution 57,256 16
Chemicals 67,017 19
Corporate and others 
11,470
 
3
Total 
358,571
 
100
     
65
By Employee’s Scope of Work
 
Number of Employees
 Percentage of Total Number of Employees (%)
Production
 178,875 50
Sales
 49,670 14
Technical
 53,066 15
Finance
 9,628 2
Administration
 2,868 1
Others
 
64,464
 
18
Total
 
358,571
 
100
     
By Education
 
Number of Employees
 Percentage of Total Number of Employees (%)
Master’s degree and above
 13,919 4
University
 92,670 26
Junior college
 79,615 22
Technical secondary school
 27,399 8
Senior high school and technical school degree or below 
144,968
 
40
Total
 
358,571
 
100
     
During this report period, there has been no significant change to our core technical team and key technicians.
We have trade unionsa worker’s association that protectprotects employee rights, organizeorganizes educational programs, assistassists in the fulfillment of economic objectives, encourageencourages employee participation in management decisions, and assistassists in mediating disputes between us and individual employees. We have not been subject to any strikes or other labor disturbances that have interfered with our operation, and we believe that our relations with our employees are good.
The total remuneration of our employees includes salary, performance bonuses and allowances. Employees also receive certain subsidies in housing, health services, education and other miscellaneous items.
As of December 31, 2014,2016, a total of 205,386225,418 employees have retired from our Company and all of them were participants in the basic pension schemes administered by provincial (autonomous region or municipalities) governments. Government-administered pension schemes are responsible for the payments of basic pensions.
E.E.          SHARE OWNERSHIP
As of December 31, 2014,2016, except our vice president Ling Yiqun who holds 13,000 shares of our A shares, none of our directors, supervisors and executive officers beneficially own any of our shares.
66

ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A.A.          MAJOR SHAREHOLDERS
The following table sets forth information regarding our 5% or more shareholders as of April 3, 2015.19, 2017.
Shareholder 
Number of
Shares Owned
(in millions)
  
Percentage of Ownership (%)
 
Sinopec Group Company(1).
  86,346   71.32 
 
Shareholder
Number of Shares Owned (in millions)
Percentage of Ownership (%)
Sinopec Group Company
85,720,671,101(1)
70.8(1)

(1) Inclusive of 553,150,000 H shares held by Sinopec Century Bright Capital Investment Ltd. (overseas wholly-owned subsidiary of Sinopec Group Company) under HKSCC Nominees Limited.

As of April 3, 2015, 1,121,891,50019, 2017, 1,127,772,400 H shares were registered in the name of a nominee of Citibank, N.A., the depositary under our ADS deposit agreement. Citibank, N.A. has advised us that, as of April 3, 2015, 11,218,91519, 2017, 11,277,724 ADSs, representing 1,121,891,5001,127,772,400 H shares, were held of record by Cede & Co. and 3936 other registered shareholders domiciled in and outside of the United States. We have no further information as to our shares held, or beneficially owned, by U.S. persons.
To avoid the adverse effects brought by theintra-industry competition between us and Sinopec Group Company to the maximum extent possible, we and Sinopec Group Company have entered into a non-competition agreement whereby Sinopec Group Company has agreed to: refrain from operating new businesses which compete or could compete with us in any of our domestic or international markets; grant us an option to purchase Sinopec Group Company’s operations that compete or could compete with our businesses; operate its sales enterprises in a manner uniform to our sales and service operations; and appoint us as sales agent for certain of its products which compete or could compete with our products. To further avoid the competition with us, Sinopec Group Company granted us an undertaking, as amended, whereby Sinopec Group Company undertakes that: first, we shall become the sole platform which deals with the exploration and production of oil and gas, oil refining, chemicals, sale of petroleum products; second, Sinopec Group Company will dispose its minor remaining chemicals business by April 2019 in order to avoid the competition with us with regard to the chemicals business; and third, given that Sinopec Group Company engages in the same or similar businesses as us with regard to the exploration and production of overseas petroleum and natural gas, Sinopec Group Company further granted us a ten-yearwe have the option, under which (i) we are entitled, after thorough analysis from political, economic and other perspectives, to require Sinopec Group Company to sell its overseas oil and gas assets owned as ofat the date of the undertaking,time, to the extent remaining in its possession, to us; and (ii) in relationus. Sinopec Group Company further promises to thesell its overseas oil and gas assets acquired by Sinopec Group Company after issuance of the undertaking, we are entitled, after thorough analysis from political, economic and other perspectives, to require Sinopec Group Company to sell its equity interests in these assets to us, within ten years after the completion of such acquisition, provided that the aforementioned proposed acquisitions comply with the applicable laws and regulations, contractual
66
obligations and other procedural requirements. Since 2012, Sinopec Group has earnestly fulfilled its undertaking in eliminating competitions in chemical business with us through: (1) subscribing capital contribution of joint ventures controlled by us, by way of injecting net assets of certain chemical business and cash; (2) authorizing us to be in charge of production plan, management and sales of the remaining chemical business. The competition in chemical business between Sinopec Group and us has been eliminated, and as a result, no further competition between Sinopec Group Company and us with regard to the chemicals business have been resolved.

B.B.          RELATED PARTY TRANSACTIONS
Sinopec Group Company owned 70.8%71.32% of our outstanding equity as of April 3, 2015.19, 2017. Sinopec Group Company is able to exercise all the rights of a controlling shareholder, including the election of directors and voting in respect of amendments to our articles of association. Sinopec Group Company, as our controlling shareholder, is subject to certain non-controlling shareholder protection provisions under our articles of association.
We have engaged from time to time and will continue to engage in a variety of transactions with Sinopec Group Company, which provide a number of services to us, including ancillary supply, transport, educational and community services. The nature of our transactions with Sinopec Group Company is governed by a number of service and other contracts between Sinopec Group Company and us. A discussion of these agreements and arrangements is set forth under the heading “Item 7 – Major Shareholders and Related Party Transactions – Related Party Transactions” in our annual report on Form 20-F filed with the Securities and Exchange Commission on October 10, 2000, April 13, 2007, May 20, 2009, April 30, 2010, and April 11, 2013, April 16 ,2014, April 10, 2015 and April 20, 2016 respectively, and under the heading “Item 4 – Information on the Company – History and Development of the Company” of this annual report.
In 2010, we acquired a 55% equity interest of SSI from Sinopec Overseas Oil & Gas Limited (“SOOGL”), a subsidiary of Sinopec Group Company for a cash consideration of $1.678 billion. SSI holds a 50% interest in Angola Block 18.
67

In 2013, we acquired, through a joint venture, owned by Sinopec Group Company and us on an equal basis, from Sinopec Group Company (i) 50% interest in CIR, (ii) 49% interest in Taihu, and (iii) 50% interest in Mansarovar, for a cash consideration of $2.711 billion in the aggregate.
In September 2014, in connection with our plan to spin off Yizheng Chemical, we acquired all of Yizheng Chemical’s assets and liabilities. As consideration, our 40.25% equity interest in Yizheng Chemical was repurchased and cancelled by Yizheng Chemical. Subsequently, through a series of inter-group company restructuring steps, Yizheng Chemical was spun off from us in December 2014. In the same year, SOI and SCC, two of our wholly-owned subsidiaries, entered into acquisition agreements with two subsidiaries of Sinopec Group Company, pursuant to which SOI and SCC acquired 99% and 1% membership interests in COOP, respectively, from the two subsidiaries of Sinopec Group Company with an aggregate consideration of US$562 million. Upon completion of the acquisition, we indirectly held 100% interest in COOP, which holds 37.5% interest in YASREF.
On August 26, 2015, we entered into a supplementary agreement of connected transactions with Sinopec Corp., whereby the terms of the Mutual Supply Agreement and the Cultural and Educational, Hygienic and Community Services Agreement (Exhibit 4.4) were extended from January 1, 2016 to December 31, 2018. The resolution relating to continuing connected transactions for the three years from 2016 to 2018 was approved at the first extraordinary general meeting for 2015 held on October 23, 2015. For details of the above continuing connected transactions, please refer to Exhibit 4.22. Capitalized terms used in this section shall have the same meaning as that used in the above-mentioned exhibit.
On August 26, 2015, we entered into an equity transfer agreement relating with Sinopec Baichuan Economic and Trading Company (Baichuan Co., a wholly-owned subsidiary of Sinopec Group Company), pursuant to which, we proposed to transfer 100% of the equity interest of Sinopec Beijing Jingtian Engineering and Construction Co., Ltd. (Jingtian Co.) held by us to Baichuan Co. The final consideration of above-mentioned equity interest was around RMB 1.869 billion.
On October 29, 2015, we entered into a joint venture agreement with SAMC in relation to the formation of Gaoqiao. We and SAMC subscribed 55% and 45% of the registered capital of Gaoqiao, respectively.
On December 28, 2015, the Proposal on Providing Completion Guarantee for the Project Financing of Zhongtian Synergetic was considered and approved at the fourth meeting of the sixth session of Board, where our directors unanimously agreed to us providing a completion guarantee to Zhongtian Synergetic Ordos coal deep processing demonstration project subject to the provision of completion guarantees by the other shareholders of Zhongtian Synergetic on a pro-rata basis (Guarantee). The Guarantee has been considered and approved at the first extraordinary general meeting for the year 2016. Zhongtian Synergetic is a connected party of the Company under the Shanghai Listing Rules because its vice chairman, Mr. Chang Zhenyong is a vice president of the Company. However, Zhongtian Synergetic is not a connected person under the Hong Kong Listing Rules.
For our related party transaction starting from January 1, 2014,2016, please also see Note 3130 of our consolidated financial statements included elsewhere in this annual report for a detailed discussion of our related party transactions.
The aggregate amount of related party transactions we incurred during 2014 was RMB 520.522 billion, of which, expenses amounted to RMB 215.211 billion (including RMB 195.735 billion of purchase of goods and services, RMB 6.753 billion of auxiliary and social services, RMB 11.302 billion of operating lease charges and RMB 1.421 billion of interest expenses), and revenues amounted to RMB 305.311 billion (including RMB 305.044 billion of sales of goods and services, RMB 0.135 billion of interest income and RMB 0.132 billion of agency commission receivable).
In 2014,2016, we provided RMB 5.962.69 billion of loans to certain subsidiariesaffiliates of Sinopec Group Company. In addition, we obtainedrepaid loans with a net amount of RMB 53.6924.88 billion fromto certain subsidiariesaffiliates of Sinopec Group Company in 2014.2016.
67
 
The amounts of the aforementioned continuing related party transactions with Sinopec Group Company did not exceed the upper limit as approved our by shareholders’ meetings and board meetings.
C.C.          INTERESTS OF EXPERTS AND COUNSEL
Not applicable.
ITEM 8.FINANCIAL INFORMATION
A.A.          CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
See consolidated financial statements included in this annual report following Item 19.
Legal Proceedings
We are involved in certain judicial and arbitral proceedings before Chinese courts or arbitral bodies concerning matters arising in connection with the conduct of our businesses. We believe, based on currently available information, that the results of such proceedings, in the aggregate, will not have a material adverse effect on our financial condition or results of operations.
Dividend Distribution Policy
In 2012, we amended our articles of association based on its original framework. Our dividend distribution policy was amended. According to our amended articles of association:
68

Our board of directors will determine the payment of dividends, if any, with respect to our shares on a per share basis. Any final dividend for a financial year shall be subject to shareholders’ approval. The board may declare interim and special dividends at any time under general authorization by a shareholders’ ordinary resolution. A decision to declare or to pay any dividends in the future, and the amount of any dividends, will depend on our results of operations, cash flows, financial condition, the payment by our subsidiaries of cash dividends to us, future prospects and other factors which our directors may determine are important.
For holders of our H shares, cash dividend payments, if any, shall be declared by our board of directors in Renminbi and paid in HK dollars. The depositary will convert the HK dollar dividend payments and distribute them to holders of ADSs in US dollars, less expenses of conversion.
The Company may distribute dividends in the following forms: cash, shares or other forms provided by laws, administrative rules, regulations of competent authorities and regulatory provisions in the place where the Company’s shares are listed. The Company shall give priority to the distribution of dividends in cash. The Company may make interim dividends distribution. The Company shall distribute cash dividends when the Company’s net profit and retained earnings, in separate financial statement, are positive and the Company has adequate cash inflows over the requirements of cash outflows of operation and sustainable development. The cash dividends per annum should not be less than thirty (30) percent of the net profit of the Company in the current year. Dividends in the form of shares will be distributed to the depositary and, except as otherwise described in the Deposit Agreement, will be distributed by the depositary in the form of additional ADSs, to holders of ADSs.

In accordance withAt the board resolution passed at the twenty-thirdtwelfth meeting of the sixth session of our fifths board, our board has proposedapproved the proposal to makedistribute a final cash dividend distribution for 2014 of RMB 0.110.17 (including tax) per ordinary share, in addition tocombining with an interim cashdistributed dividend distribution of RMB 0.090.079 (including tax) per ordinary share, earlier in 2014. Therefore, the full-year aggregate cashtotal dividend for 20142016 is RMB 0.200.249 (including tax) per ordinary share. The proposal is subject to the shareholder’s approval at the annual general meeting.
B.          SIGNIFICANT CHANGES
None.
68
B.SIGNIFICANT CHANGES
None.
ITEM 9.THE OFFER AND LISTING
A.A.          OFFER AND LISTING DETAILS
Not applicable, except for Item 9A(4) and Item 9C.
Our H Shares have been listed on the Hong Kong Stock Exchange (Code: 0386), and our ADSs, each representing 100 H Shares, have been listed on the New York Stock Exchange and the London Stock Exchange under the symbol “SNP”, since we completed our initial public offering on October 19, 2000. Prior to that time, there was no public market for our H Shares. The Hong Kong Stock Exchange is the principal non-U.S. trading market for our H Shares. Our publicly traded domestic shares, or A shares, are listed on the Stock Exchange of Shanghai since August 8, 2001 (Code: 600028).
On February 14, 2013, we completed a placing of an aggregate of 2,845,234,000 new H shares at a price of HK$8.45 per share. The net proceeds from such placing are HK$23.97 billion.
The following table sets forth, for the periods indicated, the high and low closing prices per H Share, as reported on the Stock Exchange of Hong Kong, per ADS, as reported on the New York Stock Exchange and per A share, as reported on the Stock Exchange of Shanghai.
69
 The Stock Exchange of Hong Kong The New York Stock Exchange The Shanghai Stock Exchange  
The Stock Exchange of
Hong Kong
  The New York Stock Exchange  The Shanghai Stock Exchange 
PeriodPeriod 
High
 
Low
 
High
 
Low
 
High
 
Low
Period High  Low  High  Low  High  Low 
April 2015 (as of April 2, 2015) 6.27 6.22 80.60 80.00 6.56 6.42
April 2017 (as of April 19, 2017)April 2017 (as of April 19, 2017) 6.55  5.98  84.50  76.66  5.99  5.56 
Past 6 monthsPast 6 months (HK dollar per H share)  (US dollar per ADS)  (RMB per A share) 
20172017 March 6.36  5.80  82.42  74.86  5.80  5.51 
20172017 February  6.22   6.00   80.41   77.49   6.03   5.73 
20172017 January  6.28   5.50   81.62   71.02   6.06   5.41 
20162016 December  5.81   5.46   74.36   70.86   5.67   5.27 
20162016 November  5.80   5.27   74.22   68.12   5.23   4.93 
20162016 October  5.95   5.65   77.47   72.42   5.07   4.86 
Past 6 months (HK dollar per H share) (US dollar per ADS) (RMB per A share)                           
2015 March 6.50 6.01 83.68 76.93 6.49 5.95
2015 February 6.53 6.07 83.80 78.41 6.32 5.68
2015 January 6.36 6.06 81.91 79.04 7.18 6.03
2014 December 6.59 5.93 85.60 76.12 6.56 5.41
2014 November 6.72 6.17 86.98 80.15 5.39 5.08
2014 October 6.80 6.51 87.79 84.26 5.30 5.02
Quarterly DataQuarterly Data                        
20172017 First Quarter 6.36  5.50  82.42  71.92  6.06  5.51 
20162016 Fourth Quarter  5.95   5.27   77.47   68.12   5.67   4.86 
 Third Quarter  5.84   5.28   75.21   68.10   5.02   4.70 
               Second Quarter  5.65   4.93   73.06   62.99   5.08   4.60 
Quarterly Data             First Quarter  5.09   3.88   65.15   49.82   4.96   4.27 
2015 First Quarter 6.53 6.01 83.80 76.93 7.18 5.682015 Fourth Quarter  5.81   4.35   75.39   55.73   5.39   4.74 
2014 Fourth Quarter 6.80 5.93 87.79 76.12 6.56 5.02
 Third Quarter 8.18 6.80 105.28 87.30 5.74 4.89
 Second Quarter 7.49 6.64 97.43 86.45 5.44 4.49
 First Quarter 7.06 5.74 90.21 74.53 5.41 4.38
2013 Fourth Quarter 7.01 5.97 90.15 76.64 5.05 4.27
 Third Quarter 6.25 5.12 80.89 67.42 4.69 4.14 Third Quarter  6.69   4.48   84.32   59.37   7.47   4.49 
 Second Quarter 7.03 5.08 90.19 65.95 5.67 4.10 Second Quarter  7.63   6.19   96.41   80.20   8.67   6.45 
 First Quarter 7.26 6.62 94.36 85.00 5.94 5.20 First Quarter  6.53   6.01   83.80   76.93   7.18   5.68 
                                         
Annual Data            
Annual DataAnnual Data                        
20162016    5.95   3.88   77.47   49.82   5.67   4.27 
20152015    7.63   4.35   96.41   55.73   8.67   4.49 
2014   8.18 5.74 105.28 74.53 6.56 4.382014    8.18   5.74   105.28   74.53   6.56   4.38 
2013   7.26 5.08 94.36 65.95 5.94 4.102013    7.26   5.08   94.36   65.95   5.94   4.10 
2012   9.63 6.43 124.95 82.69 7.86 5.802012    9.63   6.43   124.95   82.69   7.86   5.80 
2011   8.75 6.45 111.89 83.21 9.27 6.86
2010   7.94 5.75 102.69 73.80 13.90 7.77
___________
Source: Bloomberg

69
ITEM 10.ADDITIONAL INFORMATION
A.A.          SHARE CAPITAL
Not applicable.
B.          MEMORANDUM AND ARTICLES OF ASSOCIATION
B.MEMORANDUM AND ARTICLES OF ASSOCIATION
The following is a summary of certain provisions of our articles of association and its appendices, as amended, the Company Law of the PRC (2006) and certain other applicable laws and regulations of the PRC. You and your advisors should refer to the text of our articles of association, as amended, and to the texts of applicable laws and regulations for further information.
Objects and Purposes
We are a joint stock limited company established in accordance with the Company Law and certain other laws and regulations of the PRC. We are registered with the PRC State Administration of Industry and Commerce with business license number 100000000032985. Article 12 of our articles of association provides that our scope of businesses includes, among other things, the production, storage, pipeline transportation, land transportation, water transportation and sale of non-coal mines (oil and natural gas etc.), dangerous chemicals (ethylene, propylene, butadiene and naphtha etc.), heavy oil, rubber and other chemical raw materials and products; oil refining; wholesaling and retailing (for subsidiaries only) of gasoline, kerosene and diesel oil; the production, storage, transportation and sale of natural gas chemicals and coal chemicals; sale of lubricant, fuel oil, solvent naphtha and asphalt; production of chemical fertilizer; operation of LPG station, sales of CNG, LNG, LPG and city gas; operation of electrical vehicle charging station; production, supervision of manufacturing, installation of oil and petrochemical machinery and equipment; purchase and sale of oil and petrochemical raw and auxiliary materials, equipment and parts; technology and information, research, development, application and consultation of alternative energy products; production and sales of electricity, steam, water and industrial gases; wholesaling of farm, forestry and pasture products; operation of general merchandise convenience stores; wholesaling and retailing of knitted garments and housewares; wholesaling and retailing of cultural and sports goods and equipment; sale of
70

food, beverages and tobacco products; wholesaling and retailing of pharmaceuticals and medical devices; retailing of automobiles, motorcycles and components; repair and maintenance of and technical training for automobiles and motorcycles; wholesaling and retailing of machineries, hardware products, electronic products and household appliances; retailing of furniture and materials for indoor decoration; stalls, no-store sale and other forms of retail business; general merchandise retail; accommodation and catering services; residents´ services; transportation agency services; warehousing; operation of self-owned properties; lease of machineries; media, advertising and acting as commission agent; insurance brokerage and agency services; financial trust and management services; E-commerce; self-operation of and acting as agency for the import and export of various commodities and technologies other than those restricted or prohibited by the state from import and export; contractor of overseas mechanical, electronics, petrochemical projects and domestic international bid-inviting projects; export of equipment and materials required for the aforementioned overseas projects; dispatch of labourlabor required for the aforementioned overseas projects.
Directors
Our directors shall be elected at our shareholders’ general meeting. Cumulative voting shall be adopted for the election of directors if a controlling shareholder controls 30% or more of our shares. Details of the cumulative voting mechanism are set forth in Article 59 of the Rules and Procedures for the Shareholders’ General Meetings that is an appendix to, and forms an integral part of, our articles of association. Our directors shall be elected for a term of three years and may serve consecutive terms upon re-election, except that independent directors may only serve a maximum of two terms. Our directors are not required to hold any shares in us, and there is no age limit requirement for the retirement or non-retirement of our directors.
Where a director is materially interested, directly or indirectly, in a contract, transaction or arrangement (including any proposed contract, transaction or arrangement) with us, he or she shall declare the nature and extent of his or her interests to the board of directors at the earliest opportunity, whether or not such contract, transaction or arrangement is otherwise subject to the approval of the board. A director shall not vote, and shall not be counted in the quorum of the meeting, on any resolution concerning any contract, transaction or arrangement where the director owns material rights or interests therein. A director is deemed to be interested in a contract, transaction or arrangement in which his associate (as defined by the Listing Rule of the Hong Kong Stock Exchange) is interested.
Unless the interested director discloses his interests to the board and the contract, transaction or arrangement in which the director is materially interested is approved by the board at a meeting in which the director neither votes nor is
70
not counted in the quorum, such contract, transaction or arrangement shall be voidable by us except with respect to a bona fide party thereto who does not have notice of the director’s interests.
We are prohibited from making loans or providing guarantees to our directors and their associates except where such loan or guarantee is to meet expenditure requirement incurred or to be incurred by the director for the purposes of the company or for the purpose of enabling the director to perform his or her duties properly in accordance with the terms of a service contract approved by the shareholders in a general meeting.
The board of directors shall examine and approve the amount of the long-term loans for the current year according to the annual investment plan as approved by the shareholders’ general meeting. The chairman of the board of directors is authorized to make adjustments of no more than 10% of the total amount of the long-term loans as approved by the board of directors for the current year. Within the total amount of the long-term loans as approved by the board of directors, the chairman of the board of directors is authorized to approve and execute individual long-term loan agreement with the loan amount exceeding RMB 1 billion, and the president is authorized to approve and execute individual long-term loan agreement with the loan amount not exceeding RMB 1 billion. Within the total amount of the working capital loans for the current year as approved by the board of directors, the chairman of the board of directors is authorized to execute the overall short-term loan facility agreement for raising working capitals as we need.
Matters relating to the remuneration of our directors shall be determined by the shareholders’ general meeting.
Dividends
A distribution of final dividends for any financial year is subject to shareholders’ approval. Except as otherwise decided by Shareholders’ meeting, the board of directors may make decision on the distribution of interim dividends. Except as otherwise provided by laws and regulations, the sum of interim dividends shall not exceed 50 percents of the net profit for the half year interim period. Dividends may be distributed in the forms of cash, shares or other forms provided by laws, administrative rules or regulations of competent authorities and regulatory provisions in the place where the Company’s shares are listed. The Company shall give priority to the distribution of dividends in cash. A distribution of shares, however, must be approved by special resolution of the shareholders.
71

Dividends may only be distributed after allowance has been made for:
·recovery of losses, if any;
·allocations to the statutory surplus reserve fund; and
·allocations to a discretionary surplus reserve fund if approved by the shareholders.
The allocations to the statutory surplus reserve fund shall be 10% of our after-tax profits of the current year determined in accordance with ASBE. In the event that the statutory surplus reserve balance reaches fifty (50) percent of the registered capital of the Company, no allocation is needed.
The articles of association require us to appoint on behalf of the holders of H shares a receiving agent which is registered as a trust corporation under the Trustee Ordinance of Hong Kong to receive dividends declared by us in respect of the H shares on behalf of such shareholders. The articles of association require that cash dividends in respect of H shares be declared in Renminbi and paid by us in HK dollars. The depositary of our ADSs will convert such proceeds into U.S. dollars and will remit such converted proceeds to our holders of ADSs. If we record no profit for the year, we may not normally distribute dividends for the year.
Dividend payments may be subject to PRC withholding tax.
Voting Rights and Shareholders’ Meetings
Our board of directors shall convene a shareholders’ annual general meeting once every year and within six months from the end of the preceding financial year. Our board shall convene an extraordinary general meeting within two months of the occurrence of any one of the following events:
·where the number of directors is less than the number stipulated in the PRC Company Law or two-thirds of the number specified in our articles of association;
·where our unrecovered losses reach one-third of the total amount of our actually paid-in share capital;
71
·where shareholder(s) holding 10% or more of our issued and outstanding voting shares request(s) in writing the convening of an extraordinary general meeting;
·whenever our board deems necessary or our board of supervisors so requests; or
·circumstances provided in the articles of association.
Meetings of a special class of shareholders must be called in certain enumerated situations when the rights of the holders of such class of shares may be modified or adversely affected as discussed below. Proposals made by the board of directors, the board of supervisors or shareholder(s) holding 3% or more of the total number of voting shares shall be included in the agenda for the relevant general meeting if they are matters which fall within the scope of the functions and powers of shareholders in general meeting. Shareholder(s) holding 3% or more of the total shares of the Company may put forward interim motions by written proposals to the convener 10 days before the shareholders’ general meeting. The convener shall publish supplementary notice to announce the interim motion within two days upon receiving.
All shareholders’ meetings must be convened by our board of directors by written notice given to shareholders no less than 45 days before the meeting, by our board of supervisors or certain qualified shareholders in case a shareholders’ meeting is not convened by our board of directors and board of supervisors. Shareholder(s) holding 10% or more the total number of shares of the Company have the right to convene and chair the interim shareholders’ general meeting or class shareholders’ meeting in accordance with the provisions in laws, administrative rules and the articles of association, in the event that the board of directors and the board of supervisors fail to convene and chair such meeting upon demand made by such shareholders. Based on the written replies received by us 20 days before a shareholders’ meeting, we shall calculate the number of voting shares represented by shareholders who have indicated that they intend to attend the meeting. Where the number of voting shares represented by those shareholders amount to more than one-half of our total voting shares, we may convene the shareholders’ general meeting (regardless of the number of shareholders who actually attend). Otherwise, we shall, within five days, inform the shareholders again of the motions to be considered and the date and venue of the meeting by way of public announcement. After the announcement is made, the shareholders’ meeting may be convened.
72

The accidental omission by us to give notice of a meeting to, or the non-receipt of notice of a meeting by, a shareholder will not invalidate the proceedings at that shareholders’ meeting.
Shareholders at meetings have the power, among other things, to approve or reject our profit distribution plans, annual budget, financial statements, increase or decrease in share capital, issuance of debentures, merger or liquidation and any amendment to our articles of association. Shareholders of the shares which the Company issues to foreign investors for subscription in foreign currencies possess the same rights and undertake the same obligations as those of the shares which the Company issues to domestic investors for subscription in Renminbi. In addition, the rights of a class of shareholders may not be modified or abrogated, unless approved by a special resolution of all shareholders at a general shareholders’ meeting and by a special resolution of shareholders of that class of shares at a separate meeting. Our articles of association enumerate, without limitation, certain amendments which would be deemed to be a modification or abrogation of the rights of a class of shareholders, including increasing or decreasing the number of shares of a class disproportionate to increases or decreases of other classes of shares, removing or reducing rights to receive dividends in a particular currency or creating shares with voting or equity rights superior to shares of such class.
Cumulative voting in accordance with the relevant laws and regulations in effect is adopted for the election of directors and supervisors. For all other matters, each share is entitled to one vote on all such matters submitted to a vote of our shareholders at all shareholders’ meetings, except for meetings of a special class of shareholders where only holders of shares of the affected class are entitled to vote on the basis of one vote per share of the affected class.
Shareholders are entitled to attend and vote at meetings either in person or by proxy. Proxies must be in writing and deposited at our legal address, or such other place as is specified in the meeting notice, no less than 24 hours before the time for holding the meeting at which the proxy proposes to vote or the time appointed for the passing of the relevant resolution(s). When the instrument appointing a proxy is executed by the shareholder’s attorney-in-fact, such proxy when deposited must be accompanied by a notary certified copy of the relevant power of attorney or other authority under which the proxy was executed.
Except for those actions discussed below which require supermajority votes (“special resolutions”)(special resolutions), resolutions of the shareholders are passed by a simple majority of the voting shares held by shareholders who are present in person or by proxy. Special resolutions must be passed by or more than two-thirds of the voting rights represented held by shareholders who are present in person or by proxy.
72
The following decisions must be adopted by special resolution:
·an increase or reduction of our share capital or the issue of shares, including stock distributions, of any class, warrants and other similar securities;
·issuance of debentures;
·our division, merger, dissolution and liquidation; (Shareholders who object to a proposed division or merger are entitled to demand that either we or the shareholders who approved the merger purchase their shares at a fair price.)
·amendments to our articles of association and its appendices;
·change of our company form;
·acquisition or disposal of material assets or provision of material guarantee within one year, with the value exceeding 30% of our latest audited total assets;
·any stock incentive plan;
·any other matters required by laws and regulations or our articles of association and its appendices or considered by the shareholders in a general meeting and which they have resolved by way of an ordinary resolution to be of a nature which may have a material impact on us and should be adopted by special resolution.
All other actions taken by the shareholders, including the appointment and removal of our directors and supervisors and the declaration of cash dividend payments, will be decided by an ordinary resolution of the shareholders. The listing agreement between us and the Hong Kong Stock Exchange (the “Listing Agreement”)(Listing Agreement) provided that we may
73

not permit amendments to certain sections of the articles of association which have been mandated by the Hong Kong Stock Exchange. These sections include provisions relating to:
·varying the rights of existing classes of shares;
·voting rights;
·our power to purchase our own shares;
·rights of non-controlling shareholders; and
·procedure on liquidation.
In addition, certain amendments to the articles of association require the approval and consent of the relevant PRC authorities.
Any shareholder resolution which is in violation of any laws or administrative regulations of the PRC will be null and void subject to statutory procedures.
Liquidation Rights
In the event of our liquidation, the H shares will rank pari passu with the domestic ordinary shares, and payment of debts out of our remaining assets shall be made in the order of priority prescribed by applicable laws and regulations or, if no such standards exist, in accordance with such procedure as the liquidation committee which has been appointed either by us or the People’s Court of the PRC may consider to be fair and reasonable. After payment of debts, we shall distribute the remaining property to shareholders according to the class and proportion of their shareholders.
Further Capital Call
Shareholders are not liable to make any further contribution to the share capital other than according to the terms, which were agreed by the subscriber of the relevant shares at the time of subscription.
73
Increases in Share Capital and Preemptive Rights
The articles of association require the approval by a special resolution of the shareholders and by special resolution of holders of domestic ordinary shares and oversea-listedoverseas-listed foreign invested shares at separate shareholder class meetings be obtained prior to authorizing, allotting, issuing or granting shares, securities convertible into shares or options, warrants or similar rights to subscribe for any shares or such convertible securities. No such approval is required if, but only to the extent that:
·we issue domestic ordinary shares and/or overseas-listed foreign-invested shares, either separately or concurrently, in numbers not exceeding 20% of the number of domestic ordinary shares and overseas-listed foreign-invested shares then in issue, respectively, in any 12-month period, as approved by a special resolution of the shareholders; or
·if our plans for issuing domestic ordinary shares and overseas-listed foreign-invested shares upon our establishment are implemented within fifteen months of the date of approval by the China Securities Regulatory Commission.
New issues of shares must also be approved by the relevant PRC authorities.
Reduction of Share Capital and Purchase by Us of Our Shares and General Mandate to Repurchase Shares
We may reduce our registered share capital only upon obtaining the approval of the shareholders by a special resolution and, in certain circumstances, of relevant PRC authorities. The number of H shares, which may be purchased is subject to the Hong Kong Takeovers and Share Repurchase Codes.
74

Restrictions on Large or Controlling Shareholders
Our articles of association provide that, in addition to any obligation imposed by laws and administration regulations or required by the listing rules of the stock exchanges on which our H shares are listed, a controlling shareholder shall not exercise his voting rights in a manner prejudicial to the interests of the shareholders generally or of some part of the shareholders:
·to relieve a director or supervisor from his or her duty to act honestly in our best interests;
·to approve the expropriation by a director or supervisor (for his or her own benefit or for the benefit of another person) of our assets in any way, including, without limitation, opportunities which may benefit us; or
·to approve the expropriation by a director or supervisor (for his or her own benefit or for the benefit of another person) of the individual rights of other shareholders, including, without limitation, rights to distributions and voting rights (save according to a restructuring of our company which has been submitted for approval by the shareholders in a general meeting in accordance with our articles of association and its appendices).
A controlling shareholder, however, will not be precluded by our articles of association or any laws and administrative regulations or the listing rules of the stock exchanges on which our H shares are listed from voting on these matters.
A controlling shareholder is defined by our articles of association as any person who acting alone or in concert with others:
·is in a position to elect half or more of the board of directors;
·has the power to exercise, or to control the exercise of, 30% or more of our voting rights;
·acting separately or in concert with others, holds 30% or more of our issued and outstanding shares,; or
·acting separately or in concert with others, has de facto control of us in any other way.
As of the date of this annual report, Sinopec Group Company is and will be our only controlling shareholder.
74
Disclosure
The Listing Agreement imposes a requirement on us to keep the Hong Kong Stock Exchange, our shareholders and other holders of our listed securities informed as soon as reasonably practicable of any information relating to us and our subsidiaries, including information on any major new developments which are not public knowledge, which:
·is necessary to enable them and the public to appraise the position of us and our subsidiaries;
·is necessary to avoid the establishment of a false market in its securities; and
·might be reasonably expected materially to affect market activity in and the price of its securities.
There are also requirements under the Listing Rules for us to obtain prior shareholders’ approval and/or to disclose to shareholders details of certain acquisitions or disposals of assets and other transactions (including transactions with controlling shareholders).
Sources of Shareholders’ Rights
The PRC’s legal system is based on written statutes and is a system in which decided legal cases have little precedent value. The PRC’s legal system is similar to civil law systems in this regard. In 1979, the PRC began the process of developing its legal system by undertaking to promulgate a comprehensive system of laws. In December 1993, the Standing Committee of the 8th National People’s Congress adopted the PRC Company Law. On October 27, 2005, the PRC Company law was amended by the Standing Committee of the 10th National People’s Congress, and came into force on January 1, 2006. The amended PRC Company Law enhanced the protection of shareholders’ rights primarily in the following regards:

75

·Shareholders holding 10 percent or more of the shares of the company are entitled to petition the court to dissolve the company if (i) the company is in serious operational difficulties; (ii) its continuing existence will seriously prejudice the interests of the shareholders; and (iii) such difficulties cannot be resolved through any other means;
·Shareholders holding 1 percent or more of the shares of the company for more than 180 consecutive days are entitled to request the board of supervisors (in terms of directors and senior management) or the board of directors (in terms of supervisors) to bring legal proceedings, or bring legal proceedings in their own name on behalf of the company where it is in emergency and the company will be subject to irreparable loss if not to do so, against directors, supervisors or senior management who fail to comply with the laws and regulations or the company’s articles of association in the course of performing their duties and cause loss to the company;
·Shareholders who oppose the company’s decision on merger or separation are entitled to request the company to repurchase their shares; and
·Shareholders holding 10 percent or more of the voting rights of the company are entitled to convene a shareholders’ meeting.
Currently, the primary sources of shareholder rights are our articles of association, as amended, the PRC Company Law and the Listing Rules of the Hong Kong Stock Exchange, which, among other things, impose certain standards of conduct, fairness and disclosure on us, our directors and our controlling shareholder, i.e., Sinopec Group Company. To facilitate the offering and listing of shares of PRC companies overseas, and to regulate the behavior of companies whose shares are listed overseas, the State Council Securities Committee and the State Commission for Restructuring the Economic System issued on August 27, 1994 the Mandatory Provisions for articles of association of Company Listing Overseas (the “Mandatory Provisions”)(Mandatory Provisions). These Mandatory Provisions become entrenched in that, once they are incorporated into the articles of association of a PRC company, any amendment to those provisions will only become effective after approval by the SASAC. The Listing Rules require a number of additional provisions to the Mandatory Provisions to be included in the articles of association of PRC companies listing H shares on the Hong Kong Stock Exchange (the “Additional Provisions”)(Additional Provisions). The Mandatory Provisions and the Additional Provisions have been incorporated into our articles of association.
In addition, upon the listing of and for so long as the H shares are listed on the Hong Kong Stock Exchange, we will be subject to those relevant ordinances, rules and regulations applicable to companies listed on the Hong Kong Stock
75
Exchange, including the Listing Rules of the Hong Kong Stock Exchange, the Securities (Disclosure of Interests) Ordinance (the “SDI Ordinance”)(SDI Ordinance), the Securities (Insider Dealing) Ordinance and the Hong Kong Codes on Takeovers and Mergers and Share Repurchases (the “Hong(Hong Kong Takeovers and Repurchase Codes”)Codes).

Unless otherwise specified, all rights, obligations and protections discussed below derive from our articles of association and/or the PRC Company Law.
Enforceability of Shareholders’ Rights
There has not been any public disclosure in relation to the enforcement by holders of H shares of their rights under constitutive documents of joint stock limited companies or the PRC Company Law or in the application or interpretation of the PRC or Hong Kong regulatory provisions applicable to PRC joint stock limited companies.
In most states of the United States, shareholders may sue a corporation “derivatively”. A derivative suit involves the commencement by a shareholder of a corporate cause of action against persons (including corporate officers, directors or controlling shareholders) who have allegedly wronged the corporation, where the corporation itself has failed to enforce such claim against such persons directly. Such action is brought based upon a primary right of the corporation, but is asserted by a shareholder on behalf of the corporation. The PRC company law as amended in October 2005 and effective in January 2006 has also granted shareholders with the rights to bring such derivative suits.
Our articles of association provide that all differences or claims, arising from any provision of our articles of association, any right or obligation conferred or imposed by the PRC Company Law or any other relevant law or administrative regulation which concerns our affairs:
·between a holder of overseas-listed foreign-invested shares and us;
76

·between a holder of overseas-listed foreign-invested shares and any of our directors, supervisors, general managers, deputy general managers or other senior officers; or
·between a holder of overseas-listed foreign-invested shares and a holder of domestic ordinary shares
must be referred to arbitration at either the China International Economic and Trade Arbitration Commission in the PRC or the Hong Kong International Arbitration Center, and the laws of the PRC shall apply, save as otherwise provided in the laws and administrative regulations. Our articles of association provide that such arbitration will be final and conclusive. In June 1999, an arrangement was made between the People’s Courts of the PRC and the courts of Hong Kong to mutually enforce arbitration rewards rendered in the PRC and Hong Kong according to their respective laws. This new arrangement was approved by the Supreme Court of the PRC and the Hong Kong Legislative Council and became effective on February 1, 2000. We have provided an undertaking to the United States Securities and Exchange Commission that, at such time, if any, as all applicable laws and regulations of the PRC and (unless our H shares are no longer listed on the Hong Kong Stock Exchange) all applicable regulations of the Stock Exchange of Hong Kong Ltd. shall not prohibit, and to the extent Section 14 under the United States Securities Act of 1933, as amended, so requires, our board of directors shall propose an amendment to the articles of association which would permit shareholders to adjudicate disputes arising between our shareholders and us, our directors, supervisors or officers by means of judicial proceedings.
The holders of H shares will not be able to bring actions on the basis of violations of the Listing Rules and must rely on the Hong Kong Stock Exchange to enforce its rules. The SDI Ordinance establishes certain obligations in relation to disclosure of shareholder interests in Hong Kong listed companies, the violation of which is subject to prosecution by the Securities and Futures Commission of Hong Kong. The Hong Kong Takeovers and Repurchase Codes do not have the force of law and are only standards of commercial conduct considered acceptable for takeover and merger transactions and share repurchases in Hong Kong as established by the Securities and Futures Commission and the securities and futures industry in Hong Kong.
We have appointed our representative office, located at 410 Park515 Madison Avenue, 22nd Fl.,Suite 27 West, New York, NY 10022, USA, as our agent to receive service of process with respect to any action brought against us in certain courts in New York under the United States federal and New York State’s securities laws. However, as the PRC does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts within the United States, the United Kingdom, Japan or most other the Organization for Economic Cooperation and Development countries, administrative actions brought by regulatory authorities, such as the Commission, and other actions which result in foreign court judgments, could (assuming such actions are not required by PRC law and the articles of association to be arbitrated) only be enforced in the PRC on a reciprocal basis or according to relevant international treaty to which China is a party if such judgments or rulings do not
76
violate the basic principles of the law of the PRC or the sovereignty, security and public interest of the society of the PRC, as determined by a People’s Court of the PRC which has the jurisdiction for recognition and enforcement of judgments. We have been advised by our PRC counsel, Haiwen & Partners, that there is certain doubt as to the enforceability in the PRC of actions to enforce judgments of United States courts arising out of or based on the ownership of H shares or ADSs, including judgments arising out of or based on the civil liability provisions of United States federal or state securities laws.
Restrictions on Transferability and the Share Register
As provided in the articles of associations we may refuse to register a transfer of H shares unless:
·any relevant transfer fee is paid;
·the instrument of transfer is only related to H shares listed in Hong Kong;
·the instrument of transfer is accompanied by the share certificates to which it relates, or such other evidence is given as may be reasonably necessary to show the right of the transferor to make the transfer;
·the stamp duty which is chargeable on the instrument of transfer has already been paid;
·if it is intended that the shares be transferred to joint owners, the maximum number of joint owners shall not be more than four (4); and
·the Company does not have any lien on the relevant shares.
77

We are required to keep a register of our shareholders which shall be comprised of various parts, including one part which is to be maintained in Hong Kong in relation to H shares to be listed on the Hong Kong Stock Exchange. Shareholders have the right to inspect and, for a nominal charge, to copy the share register. No transfers of ordinary shares shall be recorded in our share register within 30 days prior to the date of a shareholders’ general meeting or within 5 days prior to the record date established for the purpose of distributing a dividend.
We have appointed HKSCC Registrars Limited to act as the registrar of our H shares. This registrar maintains our register of holders of H shares at our offices in Hong Kong and enters transfers of shares in such register upon the presentation of the documents described above.
C.C.          MATERIAL CONTRACTS
We have not entered into any material contracts other than in the ordinary course of business and other than those described under “Item 4. Information on the Company”, “Item 7 - Major Shareholders and Related Party Transactions” or elsewhere in this Form 20-F.
D.D.          EXCHANGE CONTROLS
The existing foreign exchange regulations have significantly reduced government foreign exchange controls for transactions under the current account, including trade and service related foreign exchange transactions and payment of dividends. We may undertake current account foreign exchange transactions without prior approval from the State Administration of Foreign Exchange by producing commercial documents evidencing such transactions, provided that they are processed through Chinese banks licensed to engage in foreign exchange transactions. The PRC government has stated publicly that it intends to make the Renminbi freely convertible in the future. However, we cannot predict whether the PRC government will continue its existing foreign exchange policy and when the PRC government will allow free conversion of Renminbi to foreign currency.
Foreign exchange transactions under the capital account, including principal payments in respect of foreign currency-denominated obligations, continue to be subject to significant foreign exchange controls and require the approval of the State Administration of Foreign Exchange. These limitations could affect our ability to obtain foreign exchange through debt or equity financing, or to obtain foreign exchange for capital expenditures.
On July 21, 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar.  Under the new policy, the Renminbi is permitted to fluctuate within a band against a basket of certain foreign currencies.
On January 4, 2006, the PBOC authorized the China Foreign Exchange Trade System to publish theThe exchange rate of the Renminbi against the USU.S. dollar and other foreign currencies fluctuates and is affected by, among other things, the euro,changes in the Japanese yen,PRC’s and international political and economic conditions. The PRC government has been gradually promoting the HK dollar at 9:15 amreform of each business day, which would be the medium exchange rate of Renminbi for transactions on the interbank spot foreign exchange market (over-the-counter transactions and automatic price-matching transactions) as well as transactions over bank counters.
On June 19, 2010, the PRC government decided to further promote the Renminbi exchange rate formation mechanism,regime and enhance the flexibility of Renminbi exchange rate. On August 11, 2015, the PBOC decided to further improve the mechanism of RMB's central parity rate
77
against the US dollar. Any fluctuation of exchange rate of the Renminbi against US dollars and Hong Kong dollars may have an effect on our revenues and financial condition, and the value of, and any dividends payable on, our ADSs in foreign currency terms. We cannot assure you that the fluctuation of exchange rate of the Renminbi against US dollars or other foreign currencies would not have a material and adverse effect on our operation and financial condition in the future. Information relating to the exchange risk, exchange rate and hedging activities is presented in “Item 11. Qualitative and Quantitative Disclosures about Market risk ¾ Foreign Exchange Rate Risk”.
E.E.          TAXATION
PRC Taxation
The following discussion addresses the principal PRC tax consequences of investing in the H shares or ADSs.
78

Taxation of Dividends
Individual Investors
According to the PRC Individual Income Tax Law, as amended, dividends paid by Chinese companies are ordinarily subject to a Chinese withholding tax levied at a flat rate of 20%. For a foreign individual who has no domicile and does not stay in the territory of China or who has no domicile but has stayed in the territory of China for less than one year, the receipt of dividends from a company in China is normally subject to a withholding tax of 20% unless reduced or exempted by an applicable tax treaties.
Foreign Enterprises
In accordance with the new Enterprise Income Tax Law and its implementation rules that became effective on January 1, 2008 and amended on February 24, 2017, dividends derived from the revenues accumulated from January 1, 2008 and are paid to non-resident enterprises, which are established under the laws of non-PRC jurisdictions and have no establishment or place of business in China or whose dividends from China do not relate to their establishment or place of business in China, are generally subject to a PRC withholding tax levied at a rate of 10% unless exempted or reduced pursuant to an applicable double-taxation treaty or other exemptions. Dividends paid by PRC companies to resident enterprises, including enterprises established under the laws of non-PRC jurisdictions but whose “de facto management body” is located in the PRC, are not subject to any PRC withholding tax, unless the investment income are derived from the publicly traded shares which have been held continuously by the resident enterprises for less than twelve months. Dividends, bonuses and other return based on equity investment that a non-resident enterprise with establishment or place of business in China receives from a resident enterprise and that have actual connection with such establishment or place of business are also exempted from any PRC withholding tax, except for investment income derived from the publicly traded shares which have been held continuously by the resident enterprises for less than 12 months. Chinese resident enterprises are required to withhold PRC enterprise income tax at the rate of 10% on dividends paid for 2009 and later years’ earnings payable to their respective H Shares holders that are “non-resident enterprises,” except for those holders whose dividend income is not subject to PRC enterprise income tax pursuant to PRC governmental approval.
Tax Treaties
Holders resident in countries which have entered into avoidance of double taxation treaties or arrangements with the PRC may be entitled to a reduction or exemption of the withholding tax imposed on the payment of dividends. The PRC currently has avoidance of double taxation treaties or arrangements with a number of other countries/jurisdictions , which include Australia, Canada, France, Germany, Hong Kong, Japan, Malaysia, the Netherlands, Singapore, the United Kingdom and the United States.
Under a tax treaty between United States and China, China may tax dividends paid by Sinopec Corp. to eligible US Holders up to a maximum of 10% of the gross amount of such dividend. Under the tax treaty, an eligible US Holder is a person who, by reason of domicile, residence, place of head office, place of incorporation or any other criterion of similar nature is liable to tax in the United States, subject to a detailed “treaty shopping” provision.
Shanghai-Hong Kong Stock Connect
Pursuant to the “Notice for the tax policies in relation to the Pilot Program for Shanghai-Hong Kong Stock Connect” (Caishui [2014] No.81) (the “Notice No.81”), for PRC investors investing in our H Shares through Shanghai-Hong Kong Stock Connect, we shall withhold and pay income tax at the rate of 20% on behalf of individual investors and securities investment funds. We will not withhold or pay the income tax of dividends for PRC corporate investors and such corporate investors shall be responsible for the relevant tax. For investors of the Hong Kong Stock Exchange (including corporates and individuals) investing in our A Shares through Shanghai-Hong Kong Stock Connect, we will withhold and pay income taxes at the rate of 10% on behalf of such investors. For investors who are tax residents of other countries which have entered into tax treaties with China stipulating a dividend tax rate of less than 10%, they may be entitled to a reduction or exemption of the withholding tax imposed on the payment of dividends.
Taxation of Capital Gains
In accordance with the new Enterprise Income Tax Law effective from January 1, 2008 and amended on January 8, 2011, and its implementation rules, capital gains realized by foreign enterprises which are non-resident enterprises in China upon the sale of overseas-listed shares are generally subject to a PRC withholding tax levied at a rate of 10%, unless exempted or reduced pursuant to an applicable double-taxation treaty or other exemptions. The capital gains realized by resident enterprises, including
79

enterprises established under the laws of non-PRC jurisdictions but whose “de facto
78
management body” is located in the PRC, upon the sales of overseas-listed shares are subject to the PRC enterprise income tax. Pursuant to the Notice 81, Hong Kong market investors, both corporations and individuals, investing in our A-shares through Shanghai-Hong Kong Stock Connect are temporarily exempt from corporate income tax or individual income tax, as applicable, on capital gains derived from the transfer of A-shares starting from November 17, 2014.
PRC Stamp Tax Considerations
Under the Provisional Regulations of The People’s Republic of China Concerning Stamp Tax, which becamewas effective inon October 1, 1988 and was amended in January 2011, PRC stamp tax should not be imposed on the transfer of shares of H Shares or ADSs of PRC publicly traded companies.
United States Federal Income Tax Considerations
The following is a summary of United States federal income tax considerations relating to the ownership and disposition of our H shares or ADSs by a US Holder (as defined below) that holds our H shares or ADSs as “capital assets” (generally, property held for investment) under the United States Internal Revenue Code of 1986, as amended (the “Code”). This summary is based upon existing United States federal income tax law, which is subject to differing interpretations or change, possibly with retroactive effect. This summary does not discuss all aspects of United States federal income taxation which may be important to particular holdersinvestors in light of their individual investment circumstances, such as holderscertain investors subject to special tax rules including: banks or other financial institutions, regulated investment companies, real estate investment trusts, broker-dealers, cooperatives, pension plans, insurance companies, broker-dealers, traders in securities that elect mark-to-market treatment, partnerships and their partners, tax-exempt organizations (including private foundations), non-US Holders, holders who own (directly, indirectly, or constructively) 10% or more of the voting power or value of our stock, holdersinvestors that hold H shares or ADSs as part of a straddle, hedge, conversion, constructive sale, or other integrated transaction for United States federal income tax purposes, holders who acquired their H shares or ADSs pursuant to any employee share option or otherwise as compensation, or US Holders that have a functional currency other than the United States dollar, all of whom may be subject to tax rules that differ significantly from those summarized below. In addition, this summary does not discuss any state, local, non-United States, alternative minimum tax, , non-income tax (such as the U.S. federal estate and gift tax) or Medicare tax considerations. This summary assumes that our H shares or ADSs held by investors are “capital assets” (generally, property held for investment) under the United States Internal Revenue Code of 1986, as amended (Code). US Holders should consult their tax advisors regarding the United States federal, state, local, and non-United States income and other tax considerations relating to their ownership or disposition of our H shares or ADSs.
For purposes of this summary, a US Holder is a beneficial owner of H shares or ADSs that is, for United States federal income tax purposes,:
purposes:
·an individual who is a citizen or resident of the United States;
·a corporation created in or organized under the laws of, the United States or any State thereof or the District of Columbia;
·an estate the income of which is includible in gross income for United States federal income tax purposes regardless of its source; or
·a trust (a) the administration of which is subject to the primary supervision of a United States court and which has one or more United States persons who have the authority to control all substantial decisions of the trust or (b) a trust that has otherwise elected to be treated as a United States person under the Code.
If a partnership (including any entity treated as a partnership for United States federal income tax purposes) is a beneficial owner of H shares or ADSs, the tax treatment of a partner in such partnership will depend upon the status of the partner and the activities of the partnership. Partners in a partnership holding our H shares or ADSs should consult their tax advisors regarding the United States federal income tax considerations relating to the ownership or disposition ofinvestment in our H shares or ADSs.
For United States federal income tax purposes, it is generally expected that US Holders of ADSs will be treated as the beneficial owners of the underlying H shares represented by the ADSs. The remainder of this discussion assumes that a holder of ADSs will be treated in this manner. Accordingly, deposits or withdrawals of H shares for ADSs will generally not be subject to United States federal income tax.
Passive Foreign Investment Company Considerations
80

A non-United States corporation, such as our company, will be a “passive foreign investment company” (a “PFIC”)(PFIC), for United States federal income tax purposes for any taxable year, if either (a) 75% or more of its gross income for such year consists of certain types of “passive” income or (b) 50% or more of its average quarterly assets as determined on the
79
basis of fair market value during such year produce or are held for the production of passive income. For this purpose, cash and assets readily convertible into cash are categorized as passive assets and the company’sCompany’s goodwill and other unbooked intangibles associated with active business activities may generally be classified as active assets. We will be treated as owning a proportionate share of the assets and earning a proportionate share of the income of any other corporation in which we own, directly or indirectly, more than 25% (by value) of the stock.
We do not believe that we were classified as a PFIC for the taxable year ending 2014ended December 31, 2016 and we do not expect to be classified as a PFIC for the current taxable year ending 2015.December 31, 2017. The determination of whether we will be or become a PFIC will depend, in part, upon the composition of our income and our assets (which are subject to change from year to year) and the market price of our H shares or ADSs (of which we cannot control). Although we do not expect that our business plans will change in a manner that will affect our PFIC status, no assurance can be given in this regard. Because there are uncertainties in the application of the relevant rules and PFIC status is a fact-intensive determination made on an annual basis, no assurance can be given that we will not be classified as a PFIC for any taxable year.
The discussion below under “Dividends” and “Sale or Other Disposition” of H shares or ADSs assumes that we will not be classified as a PFIC for United States federal income tax purposes. See the discussion below under the heading “Passive Foreign Investment Company Rules” for a brief summary of the PFIC rules.
Dividends
The gross amount of any cash distributions (including the amount of any tax withheld) paid on our H shares or ADSs out of our current or accumulated earnings and profits, as determined under United States federal income tax principles, will be subject to tax as dividend income on the day actually or constructively received by a US Holder, in the case of H shares, or by the depositary bank, in the case of ADSs. Because we do not intend to determine our earnings and profits on the basis of United States federal income tax principles, any distribution paid will generally be reported as a “dividend” for United States federal income tax purposes. A non-corporate recipient of dividend income will generally be subject to tax on dividend income from a “qualified foreign corporation” at a reduced capital gains rate rather than the marginal tax rates generally applicable to ordinary income provided that the holding period requirement is met.
A non-U.S. corporation (other than a corporation that is classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year) generally will be considered to be a qualified foreign corporation (i) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of Treasury of the United States determines is satisfactory for purposes of this provision and which includes an exchange of information program or (ii) with respect to any dividend it pays on stock which is readily tradable on an established securities market in the United States. There is currently a tax treaty in effect between the United States and the People’s Republic of China (the “U.S.-PRC Treaty”)(U.S.-PRC Treaty) which the Secretary of Treasury of the United States determined is satisfactory for these purposes and we believe that we are eligible for the benefits of such treaty. Additionally, our ADSs trade on the New York Stock Exchange, an established securities market in the United States. Although we presently believe that we are a qualified foreign corporation for purposes of the reduced tax rate, no assurance can be given that we will continue to be treated as a qualified foreign corporation in the future. US Holders should consult their tax advisors regarding the availability of the reduced tax rate on dividends under their particular circumstances. Dividends received on H shares or ADSs will not be eligible for the dividends received deduction allowed to corporations.
Dividends paid in non-United States currency will be includible in income in a United States dollar amount based on the exchange rate prevailing at the time of receipt of such dividends by the depositary, in the case of ADSs, or by the US Holder, in the case of H shares held directly by such US Holder, regardless of whether the non-United States currency is actually converted into United States dollars at that time. Gain or loss, if any, recognized on a subsequent sale, conversion or other disposition of the non-United States currency will generally be United States source income or loss.
Dividends received on H shares or ADSs will be treated, for United States foreign tax credit purposes, as foreign source income. A US Holder may be eligible, subject to a number of complex limitations, to claim a foreign tax credit in respect of any non-United States withholding taxes imposed on dividends received on H shares or ADSs. US Holders who do not elect to claim a foreign tax credit for foreign income tax withheld may instead claim a deduction, for United States federal income tax purposes, in respect of such withholdings, but only for a year in which the US Holder elects to do so for all creditable foreign income taxes. US Holders should consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.
8180

Sale or Other Disposition of H shares or ADSs
A US Holder will recognize capital gain or loss upon the sale or other disposition of H shares or ADSs in an amount equal to the difference between the amount realized upon the disposition and the US Holder’s adjusted tax basis in such H shares or ADSs. Any capital gain or loss will be long-term if the H shares or ADSs have been held for more than one year and will generally be United States source gain or loss for United States foreign tax credit purposes. If any PRC tax were to be imposed on any gain from the disposition of H shares or ADSs, however, a US Holder that is eligible for the benefits of the U.S.- PRC Treaty may elect to treat the gain as non-United States source gain or loss. The deductibility of a capital loss may be subject to limitations. The rules governing the foreign tax credit are complex and their outcome depends in large part on the US Holder’s individual facts and circumstances. Accordingly, US Holders should consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.

US Holders that receive currency other than the United States dollar upon the sale or other disposition of H shares will realize an amount equal to the United States dollar value of the non-United States currency on the date of such sale or other disposition, or if the shares are traded on an established securities market, in the case of cash basis and electing accrual basis taxpayers, the settlement date. US Holders will recognize currency gain or loss if the United States dollar value of the currency received on the settlement date differs from the amount realized. US Holders will have a tax basis in the currency received equal to the United States dollar amount at the spot rate on the settlement date. Generally, any gain or loss realized by US Holders on a subsequent conversion or disposition of such currency will be United States source ordinary income or loss.
Passive Foreign Investment Company Rules
If we were to be classified as a PFIC in any taxable year, a special tax regime will apply to both (a) any “excess distribution” by us to a US Holder (generally, the US Holder’s ratable portion of distributions in any year which are greater than 125% of the average annual distribution received by such US Holder in the shorter of the three preceding years or the US Holder’s holding period for our H shares or ADSs) and (b) any gain realized on the sale or other disposition of the H shares or ADSs. Under this regime, any excess distribution and realized gain will be treated as ordinary income and will be subject to tax as if (a) the excess distribution or gain had been realized ratably over the US Holder’s holding period, (b) the amount deemed realized in each year had been subject to tax in each year of that holding period at the highest marginal rate for such year (other than income allocated to the current period or any taxable period before we became a PFIC, which would be subject to tax at the US Holder’s regular ordinary income rate for the current year and would not be subject to the interest charge discussed below), and (c) the interest charge generally applicable to underpayments of tax had been imposed on the taxes deemed to have been payable in those years. In addition, dividends made to a US Holder will not qualify for the lower rates of taxation applicable to long-term capital gains discussed above under “Dividends.”
As an alternative to the foregoing rules, ifIf a “mark-to-market” election is available and a US Holder validly makes such an election, notwithstanding the foregoing, such a holder generally will be required to take into account the difference, if any, between the fair market value and its adjusted tax basis in H shares or ADSs at the end of each taxable year as ordinary income or ordinary loss (to the extent of any net mark-to-market gain previously included in income). In addition, any gain from a sale or other disposition of H shares or ADSs will be treated as ordinary income, and any loss will be treated as ordinary loss (to the extent of any net mark-to-market gain previously included in income).
Because a mark-to-market election cannot be made for any lower-tier PFICs that we may own, a US Holder may continue to be subject to the PFIC rules with respect to such US Holder’s indirect interest in any investments held by us that are treated as an equity interest in a PFIC for United States federal income tax purposes.
We do not intend to provide information necessary for US Holders to make qualified electing fund elections which, if available, would result in tax treatment different from (and generally less adverse than) the general tax treatment for PFICs described above.
Each US Holder is urged to consult its tax advisor concerning the United States federal income tax consequences of holding and disposing H shares or ADSs if we are or become treated as a PFIC, including the possibility of making a mark-to-market election, the “deemed sale” and “deemed dividend” elections and the unavailability of the election to treat us as a qualified electing fund.
Withholding Tax and Information Reporting
Certain US Holders are required to report information relating to an interest in “specified foreign financial assets,” including shares issued by a non-United States corporation, for any year in which the aggregate value of all specified
81
foreign financial assets exceeds $50,000,US$50,000, subject to certain exceptions (including an exception for ordinary shares held in
82

custodial accounts maintained with a United States financial institution). A US Holder who fails to timely furnish the required information may be subject to a penalty. In addition, information reporting generally will apply to dividends on and proceeds from the sale or other disposition of our H shares or ADSs. US withholding tax is generally inapplicable to dividends on or proceeds from the sale or other disposition of our H shares or ADSs (provided that various certification requirements have been met). US Holders are advised to consult with their tax advisors regarding the application of the United States information reporting and withholding rules.
F.F.          DIVIDENDS AND PAYING AGENTS
Not applicable.
G.G.          STATEMENT BY EXPERTS
Not applicable.
H.          DOCUMENTS ON DISPLAY
H.DOCUMENTS ON DISPLAY
This annual report contains exhibits and schedules. Any statement in this annual report about any of our contracts or other documents is not necessarily complete. If the contract or document is filed or incorporated by reference as an exhibit to this annual report, the contract or document is deemed to modify the description contained in this annual report. You must review the exhibits themselves for a complete description of the contracts or documents.

We are subject to the periodic reporting and other informational requirements of the Exchange Act. Under the Exchange Act, we are required to file reports and other information with the SEC. Specifically, we are required to file annually a Form 20-F no later than four months after the close of each fiscal year. Copies of reports and other information, when so filed, may be inspected without charge and may be obtained at prescribed rates at the public reference facilities maintained by the SEC at 100 FJudiciary Plaza, 450 Fifth Street, N.E., Room 1580,1024, NW, Washington, D.C. 20549.20549; or at New York (address: 233 Broadway, New York, NY 10279) and Chicago (address: Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661). Copies of the above materials may also be obtained from the Public Information Department of SEC at 450 Fifth Street, NW, Washington DC 20549, charges as appropriate. You may also view the registration statement (including attachments and schedules) at the New York Stock Exchange at Wall Street, New York, NY 10005. The public may obtain information regarding the Washington, D.C. Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site at www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the SEC using its EDGAR system.www.sec.gov. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
I.I.          SUBSIDIARY INFORMATION
Not applicable.
ITEM 11.QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary market risk exposures are to fluctuations in oil and gas prices, exchange rates and interest rates. Please also refer to Note 3534 to the consolidated financial statements included elsewhere in this annual report for a detailed discussion of other market risks that we have exposure to.
Commodity Price Risk
We engage in oil and gas operations and are exposed to commodity price risk related to price volatility of crude oil and refined oil products. The fluctuations in prices of crude oil and refined oil products could have significant impact on us. We use derivative financial instruments, including commodity futures and swaps, to manage a portion of this risk. As of December 31, 2013 and 2014,2016, we had certain commodity contracts of crude oil, refined oil products and chemical products designatedthat qualify as qualified cash flow hedges and economic hedges. For further information about thehedging and protection instruments. The fair valuesmarket value of our assets and liabilities for these derivative financial instruments as of December 31, 2013derivatives are RMB 0.312 billion and 2014, see Note 35 to our consolidated financial statement.
RMB 4.336 billion, respectively.
As of December 31, 2014,2016, it is estimated that a general increase/decrease of US$10 per barrel in crude oil and refined oil products, with all other variables held constant, would decrease/increase our net income and retained earnings by approximately RMB 1,167 million,0.634 billion, and increase/decreasedecrease/increase our other reserves by approximately RMB 2,206 million.4.007 billion. This sensitivity analysis has been determined assuming that the change of prices was applied to our derivative financial instruments at balance sheet date with exposure to commodity price risk.

82
Foreign Exchange Rate Risk
The Renminbi is not a freely convertible currency. With the authorization from the PRC government, the PBOC announced that the PRC government reformed the exchange rate regime by moving into a managed floating exchange rate
83

regime based on market supply and demand with reference to a basket of currencies on July 21, 2005. On June 19, 2010, theThe PRC government decided to further promotehas been gradually promoting the Renminbi exchange rate formation mechanism andto enhance the flexibility of Renminbi exchange rate. On August 11, 2015, the PBOC decided to further improve the mechanism of RMB's central parity rate against the US dollar. Actions taken by the PRC government could cause future exchange rates to vary significantly from current or historical exchange rates. Fluctuations in exchange rates may adversely affect the value, translated or converted into US dollars or Hong Kong dollars, of our net assets, earnings and any declared dividends. We cannot give any assurance that any future movements in the exchange rate of the Renminbi against the US dollar and other foreign currencies will not adversely affect our results of operations and financial condition.
The following presents various market risk information regarding market-sensitive financial instruments that we held or issued as of December 31, 20132015 and 2014.2016. We conduct our business primarily in Renminbi, which is also our functional and reporting currency.
The following tables provide information regarding instruments that are sensitive to foreign exchange rates as of December 31, 20132015 and 2014.2016. For debt obligations, the table presents cash flows and related weighted average rates by expected maturity dates.
(RMB equivalent in millions, except interest rate) 
  As of December 31, 2016 
 Expected Maturity Date  
Total
carrying amount
  Fair value 
  2017  2018  2019  2020  2021  Thereafter       
Assets                        
Cash and cash equivalent                        
In US Dollar  20,745   -   -   -   -   -   20,745   20,745 
In HK Dollar  82   -   -   -   -   -   82   82 
In Japanese Yen  12   -   -   -   -   -   12   12 
In Euro  41   -   -   -   -   -   41   41 
Others  66   -   -   -   -   -   66   66 
Time deposits with financial institutions                                
In US Dollar  7,843   -   -   -   -   -   7,843   7,843 
Liabilities                                
Debts in US Dollar                                
Fixed rate  42   6,944   25   25   283   12,091   19,410   19,289 
Average interest rate  1.40%  0.94%  1.41%  1.41%  4.07%  1.11%        
Variable rate  14,591   -   -   -   -   -   14,591   14,584 
Average interest rate(1)
  1.40%  -   -   -   -   -         
Debts in HK Dollar                                
Fixed rate  -   -   -   -   -   -   -   - 
Average interest rate  -   -   -   -   -   -         
Variable rate  1,969   -   -   -   -   -   1,969   1,969 
Average interest rate(1)
  1.68%  -   -   -   -   -         
Debts in Euro                                
Fixed rate  -   -   -   -   -   -   -   - 
Average interest rate  -   -   -   -   -   -         
Variable rate  5   -   -   -   -   -   5   5 
Average interest rate(1)
  0.68%  -   -   -   -   -         
Debts in Singapore Dollar                                
Fixed rate  -   -   -   -   -   -   -   - 
Average interest rate  -   -   -   -   -   -         
Variable rate  21   -   -   -   -   -   21   21 
Average interest rate(1)
  1.5%  -   -   -   -   -         

(RMB equivalent in millions, except interest rate)
  As of December 31, 2014 
  
Expected Maturity Date
  
Total carrying amount
  
Fair value
 
  
2015
  
2016
  
2017
  
2018
  
2019
  
Thereafter
       
Assets                        
Cash and cash equivalent                        
In US Dollar  1,998   -   -   -   -   -   1,998   1,998 
In HK Dollar  55   -   -   -   -   -   55   55 
In Japanese Yen  7   -   -   -   -   -   7   7 
In Euro  21   -   -   -   -   -   21   21 
Others  65   -   -   -   -   -   65   65 
Time deposits with financial institutions                                
In US Dollar  613   -   -   -   -   -   613   613 
Liabilities                                
Debts in US Dollar                                
Fixed rate  7,394   4,625   37   6,107   23   10,932   29,118   28,992 
Average interest rate  0.9%   1.3%   1.4%   2.1%   1.5%   3.5%  　  　 
Variable rate  126,581   612   -   -   -   -   127,193   127,193 
Average interest rate(1)
  1.3%   1.8%   -   -   -   -  　  　 
Debts in Japanese Yen                                
Fixed rate  54   54   54   54   54   175   445   492 
Average interest rate  2.6%   2.6%   2.6%   2.6%   2.6%   2.6%  　  　 
Variable rate  -   -   -   -   -   -         
Average interest rate(1)
  -   -   -   -   -   -  　  　 
Debts in HK Dollar                                
Fixed rate  5   -   -   -   -   -   5   5 
Average interest rate  1.8%   -   -   -   -   -  　  　 
Variable rate  -   -   -   -   -   -         
Average interest rate(1)
  -   -   -   -   -   -  　  　 
Debts in Euro                                
Fixed rate  10   -   -   -   -   -   10   10 
Average interest rate  3.0%   -   -   -   -   -  　  　 
Variable rate  429   -   -   -   -   -   429   429 
Average interest rate(1)
  1.2%   -   -   -   -   -  　  　 
83
__________________________
(1)  The average interest rates for variable rate debts are calculated based on the rates reported as of December 31, 2014.2016.

84
(RMB equivalent in millions, except interest rate)
(RMB equivalent in millions, except interest rate)(RMB equivalent in millions, except interest rate) 
 As of December 31, 2013  As of December 31, 2015 
 
Expected Maturity Date
  
Total carrying amount
  
Fair value
  Expected Maturity Date  
Total
carrying amount
  Fair value 
 
2014
  
2015
  
2016
  
2017
  
2018
  
Thereafter
        2016  2017  2018  2019  2020  Thereafter       
Assets                                                
Cash and cash equivalent                                                
In US Dollar  2,868   -   -   -   -   -   2,868   2,868   12,481   -   -   -   -   -   12,481   12,481 
In HK Dollar  844   -   -   -   -   -   844   844   101   -   -   -   -   -   101   101 
In Japanese Yen  9   -   -   -   -   -   9   9   8   -   -   -   -   -   8   8 
In Euro  82   -   -   -   -   -   82   82   39   -   -   -   -   -   39   39 
Others  28   -   -   -   -   -   28   28   52   -   -   -   -   -   52   52 
Time deposits with financial institutions                                                                
In US Dollar  3   -   -   -   -   -   3   3   649   -   -   -   -   -   649   649 
Liabilities                                                                
Debts in US Dollar                                                                
Fixed rate  26,655   51   4,594   37   6,074   10,670   48,081   50,726   13,033   40   6,493   25   25   11,577   31,193   30,417 
Average interest rate  1.6%   1.4%   1.3%   1.4%   1.9%   3.4%           1.01%  1.38%  1.88%  1.41%  1.41%  3.48%        
Variable rate  54,918   5   -   -   -   -   54,923   54,926   36,777   -   -   -   -   -   36,777   36,777 
Average interest rate(2)
  1.1%   2.3%   -   -   -   -         
Debts in Japanese Yen                                
Fixed rate  60   60   60   60   60   261   561   625 
Average interest rate  2.6%   2.6%   2.6%   2.6%   2.6%   2.6%         
Variable rate  -   -   -   -   -   -         
Average interest rate(2)
  -   -   -   -   -   -         
Average interest rate(1)
  1.14%  -   -   -   -   -         
Debts in HK Dollar                                                                
Fixed rate  10,953   -   -   -   -   -   10,953   10,953   -   -   -   -   -   -   -   - 
Average interest rate  4.2%   -   -   -   -   -           -   -   -   -   -   -         
Variable rate  -   -   -   -   -   -           5   -   -   -   -   -   5   5 
Average interest rate(2)
  -   -   -   -   -   -         
Average interest rate(1)
  1.80%  -   -   -   -   -         
Debts in Euro                                
Fixed rate  4   -   -   -   -   -   4   4 
Average interest rate  0.68%  -   -   -   -   -         
Variable rate  7,855   -   -   -   -   -   7,855   7,855 
Average interest rate(1)
  0.49%  -   -   -   -   -         
__________________________
(2)The average interest rates for variable rate debts are calculated based on the rates reported as of December 31, 2013.
(1)  The average interest rates for variable rate debts are calculated based on the rates reported as of December 31, 2015.

Interest Rate Risk
We are exposed to interest rate risk resulting from fluctuations in interest rates on our short-term and long-term debts. Upward fluctuations in interest rates increase the cost of new debt and the interest cost of outstanding floating rate borrowings.
Our debts consist of fixed and variable rate debt obligations with original maturities ranging from one to 22thirty years. Fluctuations in interest rates can lead to significant fluctuations in the fair values of our debt obligations.
The following tables present principal cash flows and related weighted average interest rates by expected maturity dates of our interest rate sensitive financial instruments as of December 31, 20132015 and 2014.2016.
(RMB equivalent in millions, except interest rate)    
  As of December 31, 2016 
 Expected Maturity Date  
Total carrying amount(2)
  Fair value 
  2017  2018  2019  2020  2021  Thereafter       
Assets 
Cash and cash equivalent                        
In RMB  103,522   -   -   -   -   -   103,522   103,522 
In US Dollar  20,745   -   -   -   -   -   20,745   20,745 
(RMB equivalent in millions, except interest rate)
  
As of December 31, 2014
 
  
Expected Maturity Date
 
Total carrying amount(2)
  
Fair value
 
  
2015
 
2016
  
2017
 
2018
  
2019
 
Thereafter
      
Assets 
Cash and cash equivalent                    
In RMB  7,209 -  - -  - -  7,209   7,209 
In US Dollar  1,998 -  - -  - -  1,998   1,998 
In HK Dollar  55 -  - -  - -  55   55 
In Japanese Yen  7 -  - -  - -  7   7 
In Euro  21 -  - -  - -  21   21 
Others  65 -  - -  - -  65   65 
84

In HK Dollar  82   -   -   -   -   -   82   82 
In Japanese Yen  12   -   -   -   -   -   12   12 
In Euro  41   -   -   -   -   -   41   41 
Others  66   -   -   -   -   -   66   66 
Time deposits with financial institutions                                
In RMB  10,186   -   -   -   -   -   10,186   10,186 
In US Dollar  7,843   -   -   -   -   -   7,843   7,843 
Liabilities  
Debts in RMB                                
Fixed rate  40,904   19,614   5,353   15,533   40,161   7,711   129,276   127,737 
Average interest rate  2.21%  2.78%  1.67%  2.00%  0.43%  1.92%        
Variable rate  17,288   320   8,105       168   1,113   26,993   26,993 
Average interest rate(1)
  3.4%  4.35%  4.28%      4.41%  4.41%        
Debts in US Dollar                                
Fixed rate  42   6,944   25   25   283   12,091   19,410   19,289 
Average interest rate  1.40%  0.94%  1.41%  1.41%  4.07%  1.11%        
Variable rate  14,591   -   -   -   -   -   14,591   14,584 
Average interest rate(1)
  1.40%  -   -   -   -   -         
Debts in HK Dollar                                
Fixed rate  -   -   -   -   -   -   -   - 
Average interest rate  -   -   -   -   -   -         
Variable rate  1,969   -   -   -   -   -   1,969   1,969 
Average interest rate(1)
  1.68%  -   -   -   -   -         
Debts in Euro                                
Fixed rate  -   -   -   -   -   -   -   - 
Average interest rate  -   -   -   -   -   -         
Variable rate  5   -   -   -   -   -   5   5 
Average interest rate(1)
  0.68%  -   -   -   -   -         
Debts in Singapore Dollar                                
Fixed rate  -   -   -   -   -   -   -   - 
Average interest rate  -   -   -   -   -   -         
Variable rate  21   -   -   -   -   -   21   21 
Average interest rate(1)
  1.5%  -   -   -   -   -         
                                 

__________________________
(1)   The average interest rates for variable rate debts are calculated based on the rates reported as of December 31, 2016.
(2)   Carrying amounts are used for loans from Sinopec Group Company and its affiliates as it is not practicable to estimate their fair values because the cost of obtaining discount and borrowing rates for comparable borrowings would be excessive.

(RMB equivalent in millions, except interest rate)    
  As of December 31, 2015 
 Expected Maturity Date  
Total carrying amount(2)
  Fair value 
  2016  2017  2018  2019  2020  Thereafter       
Assets 
Cash and cash equivalent                        
In RMB  56,252   -   -   -   -   -   56,252   56,252 
In US Dollar  12,481   -   -   -   -   -   12,481   12,481 

85

Time deposits with financial institutions                           
In Renminbi  132  -  -  -  -  -   132   132 
In US Dollar  613  -  -  -  -  -   613   613 
Liabilities 
Debts in RMB                           
Fixed rate  23,461   1,275   46,281   2,014   4,259   52,204   129,494   125,305 
Average interest rate  4.2%   4.7%   3.5%   3.1%   3.1%   1.4%  　  　 
Variable rate  20,215   6,958   1,050   344   5,000   8,819   42,386   42,386 
Average interest rate(1)
  3.9%   5.6%   5.6%   4.2%   5.2%   6.8%  　  　 
Debts in US Dollar                                
Fixed rate  7,394   4,625   37   6,107   23   10,932   29,118   28,992 
Average interest rate  0.9%   1.3%   1.4%   2.1%   1.5%   3.5%  　  　 
Variable rate  126,581   612   -   -   -   -   127,193   127,193 
Average interest rate(1)
  1.3%   1.8%   -   -   -   -  　  　 
Debts in Japanese Yen                                
Fixed rate  54   54   54   54   54   175   445   492 
Average interest rate  2.6%   2.6%   2.6%   2.6%   2.6%   2.6%  　  　 
Variable rate                                
Average interest rate(1)
                                
Debts in HK Dollar                                
Fixed rate  5   -   -   -   -   -   5   5 
Average interest rate  1.8%   -   -   -   -   -  　  　 
Variable rate  -   -   -   -   -   -         
Average interest rate(1)
  -   -   -   -   -   -         
Debts in Euro                                
Fixed rate  10   -   -   -   -   -   10   10 
Average interest rate  3.0%   -   -   -   -   -  　  　 
Variable rate  429   -   -   -   -   -   429   429 
Average interest rate(1)
  1.2%   -   -   -   -   -  　  　 
In HK Dollar  101   -   -   -   -   -   101   101 
In Japanese Yen  8   -   -   -   -   -   8   8 
In Euro  39   -   -   -   -   -   39   39 
Others  52   -   -   -   -   -   52   52 
Time deposits with financial institutions                                
In RMB  84   -   -   -   -   -   84   84 
In US Dollar  649   -   -   -   -   -   649   649 
Liabilities 
Debts in RMB                                
Fixed rate  40,234   29,670   17,251   -   13,000   43,096   143,251   141,583 
Average interest rate  2.08%  2.98%  3.30%  -   2.11%  0.34%        
Variable rate  17,538   8,778   8,935   103   103   650   36,107   36,107 
Average interest rate(1)
  4.12%  3.07%  3.16%  4.39%  4.39%  4.41%        
Debts in US Dollar                                
Fixed rate  13,033   40   6,493   25   25   11,577   31,193   30,417 
Average interest rate  1.01%  1.38%  1.88%  1.41%  1.41%  3.48%        
Variable rate  36,777   -   -   -   -   -   36,777   36,777 
Average interest rate(1)
  1.14%  -   -   -   -   -         
Debts in HK Dollar                                
Fixed rate  -   -   -   -   -   -   -   - 
Average interest rate  -   -   -   -   -   -         
Variable rate  5   -   -   -   -   -   5   5 
Average interest rate(1)
  1.80%  -   -   -   -   -         
Debts in Euro                                
Fixed rate  4   -   -   -   -   -   4   4 
Average interest rate  0.68%  -   -   -   -   -         
Variable rate  7,855   -   -   -   -   -   7,855   7,855 
Average interest rate(1)
  0.49%  -   -   -   -   -         
__________________________
(1)
The average interest rates for variable rate debts are calculated based on the rates reported as of December 31, 2014.
(1)   The average interest rates for variable rate debts are calculated based on the rates reported as of December 31, 2015.
(2)(2)   Carrying amounts are used for loans from Sinopec Group Company and its affiliates as it is not practicable to estimate their fair values because the cost of obtaining discount and borrowing rates for comparable borrowings would be excessive.
(RMB equivalent in millions, except interest rate)
  
As of December 31, 2013
 
  
Expected Maturity Date
  
Total carrying amount(4)
  
Fair value
 
  
2014
  
2015
  
2016
  
2017
  
2018
  
Thereafter
       
Assets 
Cash and cash equivalent                        
In RMB  11,215   -   -   -   -   -   11,215   11,215 
In US Dollar  2,868   -   -   -   -   -   2,868   2,868 
In HK Dollar  844   -   -   -   -   -   844   844 
In Japanese Yen  9   -   -   -   -   -   9   9 
In Euro  82   -   -   -   -   -   82   82 
Others  28   -   -   -   -   -   28   28 
Time deposits with financial institutions                                
In RMB  52   -   -   -   -   -   52   5 
In US Dollar  3   -   -   -   -   -   3   3 
Liabilities 
Debts in RMB                                
Fixed rate  63,617   11,238   -   50,961   2,293   51,847   179,956   173,699 
Average interest rate  2.3%   3.9%   -   3.3%   3.4%   1.4%         
Variable rate  7,668   160   6,599   454   105   -   14,986   14,721 
Average interest rate(3)
  5.1%   6.3%   5.6%   5.8%   6.4%   -         
Debts in US Dollar                                
Fixed rate  26,655   51   4,594   37   6,074   10,670   48,081   50,726 
Average interest rate  1.6%   1.4%   1.3%   1.4%   1.9%   3.4%         
Variable rate  54,918   5   -   -   -   -   54,923   54,926 
Average interest rate(3)
  1.1%   2.3%   -   -   -   -         
86
Debts in Japanese Yen                                
Fixed rate  60   60   60   60   60   261   561   625 
Average interest rate  2.6%   2.6%   2.6%   2.6%   2.6%   2.6%         
Variable rate  -   -   -   -   -   -         
Average interest rate(3)
  -   -   -   -   -   -         
Debts in HK Dollar                                
Fixed rate  10,953   -   -   -   -   -   10,953   10,953 
Average interest rate  4.2%   -   -   -   -   -         
Variable rate  -   -   -   -   -   -         
Average interest rate(3)
  -   -   -   -   -   -         
__________________________
(3)
The average interest rates for variable rate debts are calculated based on the rates reported as of December 31, 2013.
(4)Carrying amounts are used for loans from Sinopec Group Company and its affiliates as it is not practicable to estimate their fair values because the cost of obtaining discount and borrowing rates for comparable borrowings would be excessive.
ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A.A.          Debt Securities
Not applicable.
B.
B.          Warrants and Rights
Not applicable.
C.C.          Other Securities
Not applicable.
D.D.          American Depositary Shares
Depositary Fees and Charges
Under the terms of the Deposit Agreement for China Petroleum & Chemical Corporation’s American Depositary Shares (ADSs), an ADS holder may have to pay the following services fees to the Depositary:
Services Fees
Issuance of ADSs $US$5.00 (or less) per 100 ADSs (or portion of 100 ADSs) issued
Cancellation of ADSs $US$5.00 (or less) per 100 ADSs (or portion of 100 ADSs) canceled
Distribution of cash dividends or other cash distributions $US$2.00 (or less) per 100 ADSs (or portion of 100 ADSs) held
Distribution of ADSs pursuant to stock dividends, free stock distributions or exercises of rights $US$5.00 (or less) per 100 ADSs (or portion of 100 ADSs) held

86

Distribution of securities other than ADSs or rights to purchase additional ADSs $US$5.00 (or less) per 100 ADSs (or portion of 100 ADSs) held
An ADS holder will also be responsible to pay certain fees and expenses incurred by the Depositary and certain taxes and governmental charges such as:
·Taxes (including relevant interests and fines) and other governmental charges;
87

·such registration fees as may from time to time be in effect, for the registration of deposited securities in the register of members, or for the registration of transfers of deposited securities to the name of the Depositary or its nominee or the Custodian or its nominee on the making of deposits or withdrawals;
·such cable, telex and facsimile transmission expenses as are expressly provided in the Deposit Agreement;
·such expenses as are incurred by the Depositary in the conversion of foreign currency;
·such expenses as are incurred with the compliance with the foreign currency control, ADSs and other deposited securities related laws, regulations and rules; and
·any other charge payable by the Depositary, any of the Depositary’s agents, including the Custodian, Depositary, or the agents of the Custodian or Depositary, in connection with the servicing of deposited securities.
Depositary Payments for the Year 2014
2016
In 2014,2016, Citibank, N.A., the Depositary for our ADR program, provided reimbursement for our expenses related to the listing and investor’ relations activities as follows:
·
reimbursement of application fees: US$116,448.58
149,537.24
·
reimbursement of data infrastructure fees: US$1,448.14
5,234.81
·
reimbursement of proxy procedure fees: US$76,225.59
66,576.95
·
reimbursement of investor relations expenses (including expenses related to non-deal road show, investor meeting and investor relations agency): US$290,643.99
208,953.02
·
the accounting committee and accounting standard committee of public company: US$111,237.24
34,394.21
·
Total: US$596,003.54
464,696.23
ITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
A.A.          MATERIAL MODIFICATIONS TO THE RIGHTS TO SECURITIES HOLDERS
None.
B.B.          USE OF PROCEEDS
Not applicable.
87
ITEM 15.CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure the information required to be disclosed in reports filed by us under the U.S. Securities Exchange Act of 1934 (the “Exchange Act”)(Exchange Act), as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal officer, as appropriate, to allow for timely decisions regarding required
88

disclosure. Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of December 31, 2014 (the “Evaluation Date”)2016 (Evaluation Date), the end of the fiscal year covered by this annual report. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) of the Securities Exchange Act of 1934). The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting based upon the criteria established in Internal Control -- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission as of December 31, 2014.2016. Based on that evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, 20142016 based on these criteria.
PricewaterhouseCoopers Zhong Tian LLP, an independent registered public accounting firm, has audited the consolidated financial statements included in this annual report on Form 20-F and, as part of the audit, has issued a report, included herein, on the effectiveness of our internal control over financial reporting.
Changes in Internal Control over Financial Reporting
During the year ended December 31, 2014,2016, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 16.RESERVED
ITEM 16A.
16A.		AUDIT COMMITTEE FINANCIAL EXPERT
The board of directors has determined that Ms. Bao GuomingMr. Andrew Y. Yan qualifies as an audit committee financial expert in accordance with the terms of Item 16.A of Form 20-F. Ms. BaoMr. Yan was appointed as an independent non-executive director and a manager of the audit committee of the fifthsixth board of our company in 2012.2016. For Ms. Bao’sMr. Yan’s biographical information, see “Item 6 Directors, Senior Management and Employees – A. Directors, members of the supervisory committee and senior management.”
ITEM 16B.CODE OF ETHICS
Our controlling shareholder, Sinopec Group Company, has adopted a Staff Code in 2014 to provide disciplines and requirements for its staff’s conducts, including legal and ethical matters as well as the sensitivities involved in reporting illegal and unethical matters. The Staff Code covers such areas as HSE, conflict of interests, anti-corruption, protection and proper use of our assets and properties as well as reporting requirements. The Staff Code also applies to all directors, officers and employees of each subsidiary of Sinopec Group Company, including us. We have provided all our directors
88
and senior officers with a copy of the Staff Code and require them to comply with it in order to ensure our operations are proper and lawful. We have posted the Staff Code on our website, http://english.sinopec.com/corporateculture/.www.sinopec.com/listco/en/Resource/Pdf/ygsz2014b.pdf.

ITEM 16C.ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the aggregate audit fees, audit-related fees, tax fees of our principal accountants and all other fees billed for products and services provided by our principal accountants other than the audit fees, audit-related fees and tax fees for each of the fiscal years 20132015 and 2014.2016.
89
  
Audit Fees
 
Audit-Related Fees
 
Tax Fees
 
Other Fees
20132015 RMB 6764 million — — —
20142016 RMB 8773 million — — —RMB 2 million

BeforeWe are only allowed to engage our principal accountants were engaged by our company or our subsidiaries to render audit or non-audit services, after the engagement has been approved by our audit committee.
ITEM 16D.ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E.ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
None.
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
ITEM 16F.
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
None.
KPMG served as our independent registered public accounting firm for the audit of our consolidated financial statements for more than 10 years. On March 22, 2013, our board of directors approved the proposed change of our independent registered public accounting firm, KPMG, after the completion of the audit of our consolidated financial statements for the year ended December 31, 2012 and the effectiveness of our internal control over financial reporting as of December 31, 2012, based on recommendation from our audit committee. Such change in our principal accountants was due to the relevant regulations issued by the Ministry of Finance and the State-Owned Assets Supervision and Administration Commission of the PRC. According to the relevant regulations, there are restrictions in respect of the number of years of audit services that an accounting firm can continuously provide to a State-owned enterprise and its subsidiaries. As a result, we were required not to re-appoint KPMG as our principal accountant at the annual general meeting held in May 2013.
The audit reports of KPMG on our consolidated financial statements as of and for the fiscal years ended December 31, 2011 and 2012 contain no adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope, or accounting principles.
During the two fiscal years ended December 31, 2011 and 2012 and through April 11, 2013, there were no disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements if not resolved to the satisfaction of KPMG, would have caused them to make reference to the subject matter of the disagreement in connection with their report, nor have there been any reportable events (as defined in Item 16F(a)(1)(v) of Form 20-F).We provided a copy of the foregoing disclosure to KPMG and requested that KPMG furnish a letter addressed to the SEC stating whether or not KPMG agreed with such disclosure. A copy of the letter from KPMG addressed to the SEC, dated April 11, 2013, was filed as Exhibit 15.1 to our Annual Report on Form 20-F filed with SEC on April 11, 2013.
 With the approvals of our board, the audit committee and shareholders, we appointed PricewaterhouseCoopers and PricewaterhouseCoopers Zhong Tian CPAs Limited Company (the name has been changed to PricewaterhouseCoopers Zhong Tian LLP), or PwC, as our principal independent registered public accounting firm for the year 2013.
During the two fiscal years ended December 31, 2011 and 2012 and through April 11, 2013, neither we nor anyone on our behalf consulted PwC regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the registrant’s financial statements, or (ii) any matter that was either the subject of a “disagreement” (as defined in Item 16F(a)(1)(iv) of Form 20-F and related instructions to Item 16-F of Form 20-F) with PwC or a “reportable event” (as described in Item 16F(a)(1)(v) of Form 20-F).  Also, during the two fiscal years ended December 31, 2011 and 2012 and through April 11, 2013, we did not obtain any written report or oral advice that PwC concluded was an important factor considered by us in reaching a decision as to the accounting, auditing or financial reporting issue.
ITEM 16G.ITEM 16G. COMPARISON OF NEW YORK STOCK EXCHANGE CORPORATE GOVERNANCE RULES AND CHINA CORPORATE GOVERNANCE RULES FOR LISTED COMPANIES
Under the amended Corporate Governance Rules of the NYSE, foreign issuers (including us) listed on the NYSE are required to disclose a summary of the significant differences between their domestic corporate governance rules and
90

NYSE corporate governance rules that would apply to a U.S. domestic issuer. A summary of such differences is listed below:
 
NYSE corporate governance rules
 
Corporate governance rules applicable to the
domestically listed companies in China and the
Company’s governance practices
Corporate governance guidelines  
Listed companies must adopt and disclose corporate governance guidelines, involving director qualification standards, director responsibilities, directors’ access to management and independent advisors, director compensation, director continuing education, management succession, annual performance evaluation of the board of directors, etc. 
PRC corporate governance rules promulgated by China Securities Regulatory Commission prescribe detailed guidelines on directors of the listed companies, including director selection, the structure of the board of directors and director performance evaluation etc.
 
The Company has complied with the above mentioned laws or rules.
Director Independence  
A listed company must have a majority of independent directors on its board of directors. No director qualifies as “independent” unless the board of directors affirmatively determines that the director has no material relationship with the listed company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the
It is required in China that any listed company must establish an independent director system and set forth specific requirements for the qualification of independent directors. For example, an independent director shall not hold any other position in the listed company other than being a director and shall not be influenced by the main shareholders or the controlling

89

company). In addition, a director must meet certain standards to be deemed independent. For example, a director is not independent if the director is, or has been within the last three years, an employee of the listed company, or an immediate family member is, or has been within the last three years, an executive officer of the listed company, or if the director has received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than US$120,000 in direct compensation from the listed company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service). 
It is required in China that any listed company must establish an independent director system and set forth specific requirements for the qualification of independent directors. For example, an independent director shall not hold any other position in the listed company other than being a director and shall not be influenced by the main shareholders or the controlling persons of the listed company, or by any other entities or persons with whom the listed company has a significant relationship.
The Company has complied with the relevant Chinese corporate governance rules and has implemented internal rules governing the independence and responsibilities of independent directors. The Company determines the independence of independent directors every year.
   
To empower non-management directors to serve as a more effective check on management, the non-management directors of each listed company must meet at regularly scheduled executive sessions without management. No similar requirements.
   
Nominating/Corporate Governance Committee  
Listed companies must have a nominating/corporate governance committee composed entirely of independent directors. 
It is stipulated in China that the board of directors of a listed company may, through the resolution of the shareholders’ meeting, establish a nominating committee composed entirely of directors, of which the independent directors shall be the majority and the convener.
Up to now, the Company has not set up any nominating committee.
91
The nominating/corporate governance committee must have a written charter that addresses the committee’s purposes and responsibilities which, at minimum, must be to: search for eligible people for the board of directors, select and nominate directors for the next session of the shareholders’ annual meeting, study and propose corporate governance guidelines, supervise the evaluation of the board of directors and management, and evaluate the performance of the committee every year.
 Relevant responsibilities of the nominating/corporate governance committee are similar to those stipulated by the NYSE rules, but the main responsibilities do not include the research and recommendation of corporate governance guidelines, the supervision of the evaluation of the board of directors and management, or the annual evaluation of the committee.
Compensation Committee  
Listed companies must have a compensation committee composed entirely of independent directors. 
It is stipulated in China that the board of directors of a listed company may, subject to shareholders’ resolution, have a compensation and assessment committee composed entirely of directors, of whom the independent directors are the majority and act as the convener.
The compensation committee must have a written charter that addresses, at least, the following purposes and responsibilities:
(1) review and approve the corporate goals associated with CEO’s compensation, evaluate the performance of the CEO in fulfilling these goals, and, either as a committee or together with the other independent directors (as directed by the board), based on such evaluation, determine and approve the CEO’s compensation level;
It is stipulated in China that the responsibilities of the compensation committee are:
(1) to review evaluation standards on the performance of directors and the senior management and submit suggestion to the board of directors;
(2) to review compensation policies on the directors and the senior management.
 
But the committee is not required to produce a report on the executive compensation or make an annual

90

(2) make recommendations to the board with respect to non-CEO executive officer compensation, and incentive-compensation and equity-based plans that are subject to board approval;
(3) produce a committee report on executive compensation as required by the SEC to be included in the annual proxy statement or annual report filed with the SEC.
The charter must also include the requirement for an annual performance evaluation of the compensation committee.
 
The compensation committee may, in its sole discretion, retain or consult a compensation consultant, independent legal counsel or other advisor. The compensation committee shall be directly responsible for the appointment, compensation and oversight of the work of such advisor. A listed company must provide for appropriate funding for payment of reasonable compensation to such advisor. The compensation committee may select such advisor to the compensation committee only after taking into consideration all factors relevant to that person’s independence from management.
 
It is stipulated in China that the responsibilities of the compensation committee are:
(1) to study evaluation standards on the performance of directors and the senior management and submit suggestion to the board of directors;
(2) to study and review the compensation policies on the directors and the senior management.
But the committee is not required to produce a report on the executive compensation or make an annual performance evaluation of the committee.
 
The board of directors of the Company has established a compensation and performance evaluation committee composed mainly of independent directors who act as the convener, and the committee has established a written charter complying with the domestic corporate governance rules.
   
Audit Committee  
Listed companies must have an audit committee that satisfies the requirements of Rule 10A-3 of Securities Exchange Act of 1934 (the “Exchange Act”)(Exchange Act). It must have a minimum of three members, and all audit committee members must satisfy the requirements for independence set forth in Section 303A.02 of NYSE Corporate Governance Rules as well as the requirements of Rule 10A-3(b)(1) of the Exchange Act. It is stipulated in China that the board of directors of a listed company may, subject to shareholders’ resolution, establish an audit committee composed entirely of competent directors with expertise and business experience, of which the independent directors are the majority and act as the convener, and, at minimum, one independent director is an accounting professional.
92
The audit committee must have a written charter that specifies the purpose of the audit committee is, at minimum, to assist the board oversight of the integrity of financial statements, the company’s compliance with legal and regulatory requirements, qualifications and independence of independent auditors and the performance of the listed company’s internal audit function and independent auditors.
 
In addition, the written charter must require the audit committee to prepare an audit committee report as required by the SEC to be included in the listed company’s annual proxy statement as well as an annual performance evaluation of the audit committee.
 
The written charter must also specify the duties and responsibilities of the audit committee, which, at a minimum, must include those set out in Rule 10A-3(b)(2), (3), (4) and (5) of the Exchange Act, as well as other duties and responsibilities such as to obtain and review a report by the independent auditor at least annually, meet to review and discuss the listed company’s annual audited financial statements and quarterly financial statements with management and independent auditor.
 
The responsibilities of the audit committee are similar to those stipulated by the NYSE rules. The board of directors shall evaluate the independence and performance of members of the audit committee periodically, and may replace any member who is no longer suitable for the position. The company shall disclose the performance of the audit committee in its annual report, including meetings convened by the audit committee.
 
The Board of Directors of the Company has established an audit committee that satisfies relevant domestic and overseas requirements and the audit committee has a written charter.

91

Each listed company must have an internal audit department.
 China has a similar regulatory provision, and the Company has an internal audit department.
   
Shareholder approval of equity compensation plan
Shareholders must be given the opportunity to vote on all equity-compensation plans and material revisions thereto, except for, among others, plans that are made available to shareholders generally, such as typical dividend reinvestment plan and certain awards and plans in the context of mergers and acquisitions. 
The relevant regulations of China require the board of directors propose plans on the amount and types of director compensation for the shareholders’ meeting to approve. The compensation plan of executive officers shall be approved by the board and disclosed to the public.
 
The Company has complied with the above mentioned laws or rules.
Code of ethics for directors, officers and
employees
  
Listed companies must adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. Each code of business conduct and ethics must require that any waiver of the code for executive officers or directors may be made only by the board or a board committee. 
China does not have such requirement for a code for ethics. But sinceour controlling shareholder, Sinopec Group Company, adopted a Staff Code in 2015 to provide disciplines and requirements for its staff’s conducts, including legal and ethical matters as well as the sensitivities involved in reporting illegal and unethical matters. The Staff Code covers such areas as HSE, conflict of interests, anti-corruption, protection and proper use of our assets and properties as well as reporting requirements. The Staff Code also applies to all directors, officers and officersemployees of theeach subsidiary of Sinopec Group Company, have all signed the Director Service Agreement or employment agreement, as applicable, they are bound by their fiduciary duties to the Company.including us. In addition, the directors and officers must perform their legal responsibilities in accordance with the Company Law of PRC, relative requirements of CSRS and Mandatory Provisions to the Charter of Companies Listed Overseas. Meanwhile, the Company establishes The Model Code of Securities Transactions by Corporate Employees and The Rules of The Company’s Shares Transactions by Corporate Directors, Superiors and Senior Managements to regulate the above mentioned people when transacting related securities. The Company also promulgated the Code for Employees of the Company as the standards of business conduct and ethics of the employees.


93
Each listed company CEO must certify to the NYSE each year that he or she is not aware of any violation by the listed company of NYSE corporate governance listing standards and he or she must promptly notify the NYSE in writing of any non-compliance with any applicable provisions of Section 303A.
 No similar requirements.
Board of Supervisors
Listed companies are not required to have a board of supervisors.
PRC corporate governance rules promulgated by China Securities Regulatory Commission prescribe that the board of supervisors of listed companies is responsible for supervising the compliance of the company's financial affairs and the directors, managers and other senior executives of the company, and safeguarding the legitimate rights and interests of the company and the

92

shareholders. The rules also provided detailed requirements in respect of the board of supervisors of listed companies, including its duties, composition, meeting procedures, etc.
 
The Company has complied with the above rules.
ITEM 16H.MINE SAFETY DISCLOSURE
Not applicable.
ITEM 17.FINANCIAL STATEMENTS
Not applicable.
ITEM 18.FINANCIAL STATEMENTS
See consolidated financial statements included in this annual report following Item 19.
ITEM 19.EXHIBITS
11**Articles of Association of the Registrant, amended and adopted by the shareholders’ meeting on May 22, 2009 (English translation), incorporated by reference to Exhibit 1.2 to our Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 30, 2010 (File Number: 001-15138).

1.11.1**Amendment to Articles of Association of China Petroleum & Chemical Corporation, adopted by the shareholders’ meeting on May 11, 2012 (English translation), incorporated by reference to Exhibit 1.1 to our Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 11, 2013 (File Number: 001-15138).

1.21.2**Amendment to Articles of Association of China Petroleum & Chemical Corporation, adopted by the shareholders’ meeting on October 16, 2012 (English translation), incorporated by reference to Exhibit 1.2 to our Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 11, 2013 (File Number: 001-15138).

1.31.3**Amendment to Articles of Association of China Petroleum & Chemical Corporation, adopted by the shareholders’ meeting on May 29, 2013 (English translation);, incorporated by reference to Exhibit 1.3 to our Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 22, 2014 (File Number: 001-15138).

1.4**Amendment to Articles of Association of China Petroleum & Chemical Corporation, adopted by the shareholders’ meeting on May 9, 2014 (English translation).

4.11.5*Amendment to Articles of Association of China Petroleum & Chemical Corporation, adopted by the shareholders’ meeting on May 27, 2015 (English translation), incorporated by reference to Exhibit 1.5 to our Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 20, 2016 (File Number: 001-15138).

4.1**Forms of Director Service Contracts dated May 11, 2012 (English translation), , incorporated by reference to Exhibit 4.1 to our Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 11, 2013 (File Number: 001-15138).

4.24.2**Forms of Supervisor Service Contracts dated May 11, 2012 (English translation), , incorporated by reference to Exhibit 4.2 to our Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 11, 2013 (File Number: 001-15138).

4.34.3**Reorganization Agreement between China Petrochemical Corporation and China Petroleum & Chemical Corporation dated June 3, 2000 (including English translation), incorporated by reference to Exhibit 10.1 to our Registration Statement on Form F-1 filed with the Securities and Exchange Commission on October 10, 2000 (File Number: 333-12502).

4.44.4**Agreement for Mutual Provision of Products and Ancillary Services between China Petrochemical Corporation and China Petroleum & Chemical Corporation dated June 3, 2000 (including English translation), incorporated by reference to Exhibit 10.3 to our Registration Statement on Form F-1 filed with the Securities and Exchange Commission on October 10, 2000 (File Number: 333-12502).

94
93

4.54.5**Agreement for Provision of Cultural, Educational, Hygiene and Community Services between China Petrochemical Corporation and China Petroleum & Chemical Corporation dated June 3, 2000 (including English translation), incorporated by reference to Exhibit 10.4 to our Registration Statement on Form F-1 filed with the Securities and Exchange Commission on October 10, 2000 (File Number: 333-12502).

4.64.6**Trademark License Agreement between China Petrochemical Corporation and China Petroleum & Chemical Corporation dated June 3, 2000 (including English translation), incorporated by reference to Exhibit 10.6 to our Registration Statement on Form F-1 filed with the Securities and Exchange Commission on October 10, 2000 (File Number: 333-12502).

4.74.7**Patents and Proprietary Technology License Contract between China Petrochemical Corporation and China Petroleum & Chemical Corporation dated June 3, 2000 (including English translation), incorporated by reference to Exhibit 10.7 to our Registration Statement on Form F-1 filed with the Securities and Exchange Commission on October 10, 2000 (File Number: 333-12502).

4.84.8**Computer Software License Contract between China Petrochemical Corporation and China Petroleum & Chemical Corporation dated June 3, 2000 (including English translation), incorporated by reference to Exhibit 10.8 to our Registration Statement on Form F-1 filed with the Securities and Exchange Commission on October 10, 2000 (File Number: 333-12502).

4.94.9**Assets Swap Contract between China Petrochemical Corporation and China Petroleum & Chemical Corporation dated June 3, 2000 (including English translation), incorporated by reference to Exhibit 10.9 to our Registration Statement on Form F-1 filed with the Securities and Exchange Commission on October 10, 2000 (File Number: 333-12502).

4.104.10**Land Use Rights Leasing Contract between China Petrochemical Corporation and China Petroleum & Chemical Corporation dated June 3, 2000 (including English translation), incorporated by reference to Exhibit 10.10 to our Registration Statement on Form F-1 filed with the Securities and Exchange Commission on October 10, 2000 (File Number: 333-12502).

4.124.12**Property Leasing Contract between China Petrochemical Corporation and China Petroleum & Chemical Corporation dated June 3, 2000 (including English translation), incorporated by reference to Exhibit 10.11 to our Registration Statement on Form F-1 filed with the Securities and Exchange Commission on October 10, 2000 (File Number: 333-12502).

4.134.13**Accounts Collectable Contract between China Petrochemical Corporation and China Petroleum & Chemical Corporation dated August 16, 2000 (including English translation), incorporated by reference to Exhibit 10.17 to our Registration Statement on Form F-1 filed with the Securities and Exchange Commission on October 10, 2000 (File Number: 333-12502).

4.144.14**Loan Transfer and Adjustment Contract between China Petrochemical Corporation and China Petroleum & Chemical Corporation dated August 16, 2000 (including English translation), incorporated by reference to Exhibit 10.18 to our Registration Statement on Form F-1 filed with the Securities and Exchange Commission on October 10, 2000 (File Number: 333-12502).

4.154.15**Agreement on Adjustment to Related Party Transactions between China Petrochemical Corporation and China Petroleum & Chemical Corporation dated June 11, 2001 (English translation), incorporated by reference to Exhibit 4.15 to our Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 13, 2007 (File Number: 001-15138).

4.164.16**Land Use Right Leasing Agreement between China Petrochemical Corporation and China Petroleum & Chemical Corporation dated August 22, 2003 (English translation), incorporated by reference to Exhibit 4.16 to our Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 13, 2007 (File Number: 001-15138).

4.174.17**2004 Agreement on Adjustment to Related Party Transactions between China Petrochemical Corporation and China Petroleum & Chemical Corporation dated October 31, 2004 (English translation) , incorporated by reference to Exhibit 4.17 to our Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 13, 2007 (File Number: 001-15138).

95
94

4.184.18**Memorandum on Adjustment of Rent of Land Use Rights between China Petrochemical Corporation and China Petroleum & Chemical Corporation dated March 31, 2006 (English translation) , incorporated by reference to Exhibit 4.18 to our Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 13, 2007 (File Number: 001-15138).

4.194.19**Supplemental Agreement on Related Party Transactions between China Petrochemical Corporation and China Petroleum & Chemical Corporation dated March 31, 2006 (English translation) , incorporated by reference to Exhibit 4.19 to our Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 13, 2007 (File Number: 001-15138).

4.19.14.19.1**Continuing Connected Transactions Second Supplemental Agreement between China Petrochemical Corporation and China Petroleum & Chemical Corporation dated August 21, 2009 (English translation), incorporated by reference to Exhibit 4.21 to our Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 30, 2010 (File Number: 001-15138).

4.19.24.19.2**Continuing Connected Transactions Third Supplemental Agreement between China Petrochemical Corporation and China Petroleum & Chemical Corporation dated August 24, 2012 (English translation), incorporated by reference to Exhibit 4.19.2 to our Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 11, 2013 (File Number: 001-15138).

4.204.20**Memorandum on Adjustment of Rent of Land Use Rights between China Petrochemical Corporation and China Petroleum & Chemical Corporation dated August 22, 2008 (English Translation), incorporated by reference to Exhibit 4.20 to our Annual Report on Form 20-F filed with the Securities and Exchange Commission on May 20, 2009 (File Number: 001-15138).

4.20.14.20.1**Land Use Rights Leasing Agreement Third Amendment Memo between China Petrochemical Corporation and China Petroleum & Chemical Corporation dated August 24, 2012 (English Translation), incorporated by reference to Exhibit 4.20.1 to our Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 11, 2013 (File Number: 001-15138).

4.214.21**Non-Compete Agreement Between China Petrochemical Corporation and China Petroleum & Chemical Corporation dated June 3, 2000 and its related Undertakings (English translation), incorporated by reference to Exhibit 4.21 to our Annual Report on Form 20-F filed with the Securities and Exchange Commission on September 26, 2013 (File Number: 001-15138).

4.21.1**Undertakings from China Petrochemical Corporation Regarding Further Avoiding Competition with China Petroleum & Chemical Corporation dated April 28, 2014 (English translation).

4.22*
A Supplementary Agreement to the existing Non-Compete Agreement Between China Petrochemical Corporation and China Petroleum & Chemical Corporation dated June 3, 2000 and its related Undertakings (English translation), incorporated by reference to Exhibit 4.22 to our Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 20, 2016 (File Number: 001-15138).

8.1**A list of the Registrant’s subsidiaries.

12.1*Certification of Chairman pursuant to Rule 13a-14(a).

12.2*Certification of President pursuant to Rule 13a-14(a).

12.3*Certification of CFO pursuant to Rule 13a-14(a).

13**Certification of CEO and CFO pursuant to 18 U.S.C. §1350, and Rule 13a-14(b).

15.115.1**Letter from KPMG regarding Item 16F of this annual report, incorporated by reference to Exhibit 15.1 to our Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 11,September 26, 2013 (File Number: 001-15138).


*   Filed herewith.
** Furnished with this annual report on Form 20-F.

9695


SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

China Petroleum & Chemical Corporation

China Petroleum & Chemical Corporation
By:/s/ Huang Wensheng
Name:  Huang Wensheng
Title:By:  /s/ Huang Wensheng                           
Name: Huang Wensheng
Title:   Secretary to the Board of Directors



Date: April 10, 201524, 2017

97
 
CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


 Page
  
ReportsReport of independent registered public accounting firmsfirmF-2
  
  
Consolidated statement of incomeF-4F-3
  
  
Consolidated statement of comprehensive incomeF-5F-4
  
  
Consolidated balance sheetF-6F-5
  
  
Consolidated statement of changes in equityF-7F-6
  
  
Consolidated statement of cash flowsF-10F-9
  
  
Notes to consolidated financial statementsF-12F-11
  
  
Supplemental information on oil and gas producing activities (unaudited)F-70


F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


The Board of Directors and Stockholders
China Petroleum & Chemical Corporation:

We have audited the accompanying consolidated statements of income, comprehensive income, changes in equity and cash flows of China Petroleum & Chemical Corporation and its subsidiaries for the year ended December 31, 2012. These consolidated financial statements are the responsibility of China Petroleum & Chemical Corporation’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of China Petroleum & Chemical Corporation and its subsidiaries for the year ended December 31, 2012 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.




/S/ KPMG
Hong Kong, China
March 22, 2013, except note 11,
which is as of March 21, 2014

F-2

Report of Independent Registered Public Accounting Firm

To the Shareholders of China Petroleum & Chemical Corporation,

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, comprehensive income, changes in equity and cash flows present fairly, in all material respects, the financial position of China Petroleum & Chemical Corporation (the “Company”) and its subsidiaries (collectively referred to as the “Group”) at December 31, 20142016 and 2013,2015, and the results of their operations and their cash flows for each of the twothree years in the period ended December 31, 20142016 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014,2016, based on criteria established in Internal Control - Integrated Framework (2013) (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 15. Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.




/s/ PricewaterhouseCoopers Zhong Tian LLP

Shanghai, the People’s Republic of China

March 20, 2015
24, 2017

F-3F-2
CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2012, 20132014, 2015 AND 20142016
(Amounts in millions, except per share data)

      Years ended December 31, 
   Note  2014  2015  2016 
     RMB  RMB  RMB 
Operating revenues            
Sales of goods     2,783,265   1,977,877   1,880,190 
Other operating revenues  3   44,301   42,498   50,721 
       2,827,566   2,020,375   1,930,911 
                 
Operating expenses                
Purchased crude oil, products and operating supplies and expenses      (2,335,530)  (1,494,046)  (1,379,691)
Selling, general and administrative expenses  4   (68,543)  (69,491)  (64,360)
Depreciation, depletion and amortization      (90,196)  (96,460)  (108,425)
Exploration expenses, including dry holes      (10,969)  (10,459)  (11,035)
Personnel expenses  5   (57,525)  (56,619)  (63,887)
Taxes other than income tax  6   (191,208)  (236,349)  (232,006)
Other operating expenses, net  7   (156)  (129)  5,686 
Total operating expenses      (2,754,127)  (1,963,553)  (1,853,718)
Operating income      73,439   56,822   77,193 
                 
Finance costs                
Interest expense  8   (11,218)  (8,133)  (9,219)
Interest income      1,817   3,010   3,218 
Loss on embedded derivative component of the convertible bonds  38(g)   (4,611)  (259) － 
Net foreign currency exchange loss      (178)  (3,857)  (610)
Net finance costs      (14,190)  (9,239)  (6,611)
Investment income      2,704   466   263 
Share of profits less losses from associates and joint ventures      3,865   8,362   9,306 
Earnings before income tax      65,818   56,411   80,151 
Tax expense  9   (17,571)  (12,613)  (20,707)
Net income                48,247   43,798   59,444 
                 
Attributable to:                
Owners of the Company      46,639   32,512   46,672 
Non-controlling interests      1,608   11,286   12,772 
Net income                48,247   43,798   59,444 
                 
Earnings per share:                
Basic  11   0.40   0.27   0.39 
Diluted  11   0.40   0.27   0.39 
 
     Years ended December 31, 
   Note  2012  2013  2014 
     RMB  RMB  RMB 
Operating revenues            
Sales of goods     2,733,618   2,833,247   2,781,641 
Other operating revenues  3   52,427   47,064   44,273 
       2,786,045   2,880,311   2,825,914 
                 
Operating expenses                
Purchased crude oil, products and operating supplies and expenses      (2,301,199)  (2,371,858)  (2,334,399)
Selling, general and administrative expenses  4   (61,174)  (69,928)  (68,374)
Depreciation, depletion and amortization      (70,456)  (81,265)  (90,097)
Exploration expenses, including dry holes      (15,533)  (12,573)  (10,969)
Personnel expenses  5   (51,767)  (55,353)  (57,233)
Taxes other than income tax  6   (188,483)  (190,672)  (191,202)
Other operating income / (expenses), net  7   1,229   (1,877)  (153)
Total operating expenses      (2,687,383)  (2,783,526)  (2,752,427)
Operating income      98,662   96,785   73,487 
                 
Finance costs                
Interest expense  8   (11,217)  (10,602)  (11,218)
Interest income      1,254   1,568   1,779 
(Loss) / gain on embedded derivative component of the convertible bonds  24(iii) and (v)   (62)  2,028   (4,611)
Net foreign currency exchange gains / (loss)      144   2,760   (179)
Net finance costs      (9,881)  (4,246)  (14,229)
Investment income      235   154   2,616 
Share of profits less losses from associates and joint ventures      1,626   2,359   3,630 
Earnings before income tax      90,642   95,052   65,504 
Tax expense  9   (23,846)  (24,763)  (17,571)
Net income      66,796   70,289   47,933 
                 
Attributable to:                
Owners of the Company      63,879   66,132   46,466 
Non-controlling interests      2,917   4,157   1,467 
Net income      66,796   70,289   47,933 
                 
Earnings per share:                
Basic  11   0.57   0.57   0.40 
Diluted  11   0.55   0.53   0.40 
                 

See accompanying notes to consolidated financial statements.

F-4F-3

CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2012, 20132014, 2015 AND 20142016
(Amounts in millions)

      Years ended December 31, 
   Note  2014  2015  2016 
     RMB  RMB  RMB 
             
Net income     48,247   43,798   59,444 
                
Other comprehensive income:  10             
Items that may be reclassified subsequently to profit or loss (net of tax and after reclassification adjustments):                
Cash flow hedges      (4,485)  3,163   2,014 
Available-for-sale securities      (1,225)  62   (24)
Share of other comprehensive (loss)/income of associates and joint ventures      (3,042)  (5,356)  45 
Foreign currency translation differences      (514)  2,268   4,298 
Total items that may be reclassified subsequently to profit or loss      (9,266)  137   6,333 
Total other comprehensive income      (9,266)  137   6,333 
                 
Total comprehensive income for the year      38,981   43,935   65,777 
                 
Attributable to:                
Owners of the Company      38,971   31,789   53,724 
Non-controlling interests      10   12,146   12,053 
Total comprehensive income for the year      38,981   43,935   65,777 
     Years ended December 31, 
   Note  2012  2013  2014 
     RMB  RMB  RMB 
             
Net income     66,796   70,289   47,933 
                
Other comprehensive income:  10             
Items that may be reclassified subsequently to profit or loss (after tax and reclassification adjustments):                
Cash flow hedges      (151)  604   (4,485)
Available-for-sale securities      26   1,314   (1,225)
Share of other comprehensive income of associates and joint ventures      80   (297)  (3,042)
Foreign currency translation differences      (44)  (689)  (514)
Total items that may be reclassified subsequently to profit or loss      (89)  932   (9,266)
Total other comprehensive income      (89)  932   (9,266)
                 
Total comprehensive income for the year      66,707   71,221   38,667 
                 
Attributable to:                
Owners of the Company      63,814   67,312   38,798 
Non-controlling interests      2,893   3,909   (131)
Total comprehensive income for the year      66,707   71,221   38,667 
                 




See accompanying notes to consolidated financial statements.

F-5F-4

CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 20132015 AND 20142016
(Amounts in millions)

      December 31, 
ASSETS  Note  2015  2016 
Current assets         
Cash and cash equivalents     68,933   124,468 
Time deposits with financial institutions     733   18,029 
Trade accounts receivable, net  12   56,142   50,289 
Bills receivable      10,964   13,197 
Inventories  13   145,608   156,511 
Prepaid expenses and other current assets  14   51,277   49,767 
Total current assets      333,657   412,261 
Non-current assets            
Property, plant and equipment, net  15   733,449   690,594 
Construction in progress  16   152,325   129,581 
Goodwill  17   6,271   6,353 
Interest in associates  18   40,712   66,116 
Interest in joint ventures  19   43,581   50,696 
Available-for-sale financial assets  20   10,964   11,408 
Deferred tax assets  21   7,469   7,214 
Lease prepayments  22   51,049   54,241 
Long-term prepayments and other assets  23   67,791   70,145 
Total non-current assets      1,113,611   1,086,348 
Total assets                1,447,268   1,498,609 
LIABILITIES AND EQUITY            
Current liabilities            
Short-term debts  24   71,517   56,239 
Loans from Sinopec Group Company and fellow subsidiaries  24   43,929   18,580 
Trade accounts payable  25   130,558   174,301 
Bills payable  25   3,566   5,828 
Accrued expenses and other payables  26   212,214   224,544 
Income tax payable      1,048   6,051 
Total current liabilities      462,832   485,543 
Non-current liabilities            
Long-term debts  24   95,446   72,674 
Loans from Sinopec Group Company and fellow subsidiaries  24   44,300   44,772 
Deferred tax liabilities  21   8,259   7,661 
Provisions  27   33,186   39,298 
Other long-term liabilities      15,084   17,426 
Total non-current liabilities      196,275   181,831 
Total liabilities      659,107   667,374 
Equity            
Share capital  28   121,071   121,071 
Reserves  38   555,126   589,923 
Total equity attributable to owners of the Company      676,197   710,994 
Non-controlling interests      111,964   120,241 
Total equity      788,161   831,235 
Total liabilities and equity      1,447,268   1,498,609 

     December 31, 
   Note  2013  2014 
     RMB  RMB 
ASSETS         
Current assets         
Cash and cash equivalents     15,046   9,355 
Time deposits with financial institutions     55   745 
Trade accounts receivable, net  12   68,466   90,831 
Bills receivable      28,771   13,963 
Inventories  13   221,906   188,223 
Prepaid expenses and other current assets  14   38,766   57,027 
Total current assets      373,010   360,144 
Non-current assets            
Property, plant and equipment, net  15   669,595   703,485 
 Construction in progress  16   160,630   177,667 
Goodwill  17   6,255   6,281 
Interest in associates  18   28,444   32,119 
Interest in joint ventures  19   46,874   48,474 
Available-for-sale financial assets  20   3,730   868 
Deferred tax assets  21   4,141   6,979 
Lease prepayments  22   43,270   49,136 
Long-term prepayments and other assets  23   46,967   66,215 
Total non-current assets      1,009,906   1,091,224 
Total assets      1,382,916   1,451,368 
LIABILITIES AND EQUITY            
Current liabilities            
Short-term debts  24   109,806   75,183 
Loans from Sinopec Group Company and fellow subsidiaries  24   54,064   102,965 
Trade accounts payable  25   202,724   198,366 
Bills payable  25   4,526   4,577 
Accrued expenses and other payables  26   197,606   222,075 
Income tax payable      3,096   1,091 
Total current liabilities      571,822   604,257 
Non-current liabilities            
Long-term debts  24   107,234   107,787 
Loans from Sinopec Group Company and fellow subsidiaries  24   38,356   43,145 
Deferred tax liabilities  21   7,977   7,820 
Provisions  27   26,080   29,715 
Other long-term liabilities      9,821   13,067 
Total non-current liabilities      189,468   201,534 
Total liabilities      761,290   805,791 
Equity            
Share capital  28   116,565   118,280 
Reserves  29   452,238   474,761 
Total equity attributable to owners of the Company      568,803   593,041 
Non-controlling interests      52,823   52,536 
Total equity      621,626   645,577 
Total liabilities and equity      1,382,916   1,451,368 
             

See accompanying notes to consolidated financial statements.

F-6F-5
CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2012, 20132014, 2015 AND 20142016
(Amounts in millions)

  Share capital  Capital reserve  Share premium  Statutory surplus reserve  Dis- cretionary surplus reserve  Other reserves  Retained earnings  Total equity attributable to owners of the Company  Non-controlling interests  Total equity 
  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB 
                               
Balance as of December 31, 2013  116,565   (33,713)  33,347   73,337   117,000   2,491   259,776   568,803   52,823   621,626 
Contribution from SAMC in the Acquisition of Gaoqiao Branch of SAMC (Note 1) －   2,284  －  －  －  －  －   2,284   1,868   4,152 
Balance as of January 1, 2014  116,565   (31,429)  33,347   73,337   117,000   2,491   259,776   571,087   54,691   625,778 
Net income －  －  －  －  －  －   46,639   46,639   1,608   48,247 
Other comprehensive income (Note 10) －  －  －  －  －   (7,668) －   (7,668)  (1,598)  (9,266)
Total comprehensive income for the year －  －  －  －  －   (7,668)  46,639   38,971   10   38,981 
Transactions with owners, recorded directly in equity:                                        
Contributions by and distributions to owners:                                        
Conversion of the 2011 Convertible Bonds (Note 38(g))  1,715  －   8,477  －  －  －  －   10,192  －   10,192 
Final dividend for 2013 －  －  －  －  －  －   (17,519)  (17,519) －   (17,519)
Interim dividend for 2014 －  －  －  －  －  －   (10,512)  (10,512) －   (10,512)
Appropriation (Note 38(c)) －  －  －   3,215  －  －   (3,215) －  －  － 
Contributions to subsidiaries from non-controlling interests －  －  －  －  －  －  －  －   4,155   4,155 
Distributions to non-controlling interests －  －  －  －  －  －  －  －   (1,545)  (1,545)
Profit distribution to SAMC (Note 1) －  －  －  －  －  －   (173)  (173)  (141)  (314)
Total contributions by and distributions to owners  1,715  －   8,477   3,215  －  －   (31,419)  (18,012)  2,469   (15,543)
Changes in ownership interests in subsidiaries that do not result in a loss of control:                                        
Transaction with non-controlling interests －   3,216  －  －  －  －  －   3,216   (2,877)  339 
Total changes in ownership interests in subsidiaries that do not result in a loss of control －   3,216  －  －  －  －  －   3,216   (2,877)  339 
Total transactions with owners  1,715   3,216   8,477   3,215  －  －   (31,419)  (14,796)  (408)  (15,204)
Others －   (70) －  －  －   (1,002)  1,065   (7)  54   47 
Balance as of December 31, 2014  118,280   (28,283)  41,824   76,552   117,000   (6,179)  276,061   595,255   54,347   649,602 
  
Share
capital
  
Capital
reserve
  
Share
premium
  
Statutory
surplus
reserve
  
Dis-
cretionary
surplus
reserve
  
Other
reserves
  
Retained
earnings
  
Total equity attributable
to owners of
 the Company
  
 
Non-controlling
interests
  
Total
equity
 
  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB 
 
Balance as of January 1, 2012
  86,702   (33,208)  24,953   61,263   117,000   2,935   212,683   472,328   35,016   507,344 
Net income  —   —   —   —   —   —   63,879   63,879   2,917   66,796 
Other comprehensive income(Note 10)  —   —   —   —   —   (65)  —   (65)  (24)  (89)
Total comprehensive income for the year  —   —   —   —   —   (65)  63,879   63,814   2,893   66,707 
Transactions with owners, recorded directly in equity:                                        
Contributions by and distributions to owners:                                        
Conversion of the 2011 Convertible Bonds (Note 24)  118   —   799   —   —   —   —   917   —   917 
Final dividend for 2011  —   —   —   —   —   —   (17,364)  (17,364)  —   (17,364)
Interim dividend for 2012  —   —   —   —   —   —   (8,682)  (8,682)  —   (8,682)
Appropriation (Note 29 (c))  —   —   —   6,340   —   —   (6,340)  —   —   — 
Rights issue of shares by a subsidiary, net ofissuance costs (Note29(g))  —   (18)  —   —   —   —   —   (18)  781   763 
Distribution to Sinopec Group Company  —   (2)  —   —   —   —   —   (2)  —   (2)
Distributions by subsidiaries to non-controlling interests, net of contributions  —   —   —   —   —   —   —   —   (1,462)  (1,462)
Total contributions by and distributions to owners  118   (20)  799   6,340   —   —   (32,386)  (25,149)  (681)  (25,830)
Changes in ownership interests in subsidiaries that do not result in a loss of control                                        
Acquisitions of non-controlling interests of subsidiaries  —   (79)  —   —   —   —   —   (79)  (106)  (185)
Total transactions with owners  118   (99)  799   6,340   —   —   (32,386)  (25,228)  (787)  (26,015)
Others (Note 29(g))  —   —   —   —   —   435   (435)  —   —   — 
Balance as of December 31, 2012  86,820   (33,307)  25,752   67,603   117,000   3,305   243,741   510,914   37,122   548,036 
                                         

See accompanying notes to consolidated financial statements.

F-7F-6

CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2012, 20132014, 2015 AND 20142016
(Amounts in millions)

  Share capital  Capital reserve  Share premium  Statutory surplus reserve  Dis- cretionary surplus reserve  Other reserves  
Retained
earnings
  Total equity attributable to owners of the Company  Non-controlling interests  Total equity 
  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB 
                               
Balance as of December 31, 2014  118,280   (30,497)  41,824   76,552   117,000   (6,179)  276,061   593,041   52,536   645,577 
Contribution from SAMC in the Acquisition of Gaoqiao Branch of SAMC (Note 1) －   2,214  －  －  －  －  －   2,214   1,811   4,025 
Balance as of January 1, 2015  118,280   (28,283)  41,824   76,552   117,000   (6,179)  276,061   595,255   54,347   649,602 
Net income －  －  －  －  －  －   32,512   32,512   11,286   43,798 
Other comprehensive income (Note 10) －  －  －  －  －   (1,169) －   (1,169)  1,306   137 
Total comprehensive income for the year －  －  －  －  －   (1,169)  32,512   31,343   12,592   43,935 
Transactions with owners, recorded directly in equity:                                        
Contributions by and distributions to owners:                                        
Conversion of the 2011 Convertible Bonds  (Note 38(g))  2,791  －   14,026  －  －  －  －   16,817  －   16,817 
Final dividend for 2014 －  －  －  －  －  －   (13,318)  (13,318) －   (13,318)
Interim dividend for 2015 －  －  －  －  －  －   (10,896)  (10,896) －   (10,896)
Appropriation (Note 38 (c)) －  －  －   3,088  －  －   (3,088) －  －  － 
Contributions to subsidiaries from non-controlling interests －   56,224  －  －  －   446  －   56,670   48,807   105,477 
Distributions to non-controlling interests －  －  －  －  －  －  －  －   (3,389)  (3,389)
Profit distribution to SAMC (Note 1) －  －  －  －  －  －   (74)  (74)  (60)  (134)
Total contributions by and distributions to owners  2,791   56,224   14,026   3,088  －   446   (27,376)  49,199   45,358   94,557 
Changes in ownership interests in subsidiaries that do not result in a loss of control:                                        
Transaction with non-controlling interests －   326  －  －  －  －  －   326   (326) － 
Total changes in ownership interests in subsidiaries that do not result in a loss of control －   326  －  －  －  －  －   326   (326) － 
Total transactions with owners  2,791   56,550   14,026   3,088  －   446   (27,376)  49,525   45,032   94,557 
Others －   74  －  －  －   121   (121)  74   (7)  67 
Balance as of December 31, 2015  121,071   28,341   55,850   79,640   117,000   (6,781)  281,076   676,197   111,964   788,161 
  
Share
capital
  
Capital
reserve
  
Share
premium
  
Statutory
surplus
reserve
  
Dis-
cretionary
surplus
reserve
  
Other
reserves
  
Retained
earnings
  
Total equity attributable
to owners of
 the Company
  
 
Non-controlling
interests
  
Total
 equity
 
  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB 
Balance as of January 1, 2013  86,820   (33,307)  25,752   67,603   117,000   3,305   243,741   510,914   37,122   548,036 
Net income  —   —   —   —   —   —   66,132   66,132   4,157   70,289 
Other comprehensive income (Note 10)  —   —   —   —   —   1,180   —   1,180   (248)  932 
Total comprehensive income for the year  —   —   —   —   —   1,180   66,132   67,312   3,909   71,221 
Transactions with owners, recorded directly in equity:                                        
Contributions by and distributions to owners:                                        
Conversion of the 2011 Convertible Bonds (Note 24)  —   —   1   —   —   —   —   1   —   1 
Final dividend for 2012  —   —   —   —   —   —   (17,933)  (17,933)  —   (17,933)
Interim dividend for 2013  —   —   —   —   —   —   (10,491)  (10,491)  —   (10,491)
Appropriation (Note 29(c))  —   —   —   5,734   —   —   (5,734)  —   —   — 
Rights issue of H shares, net of issuance costs (Note 24)  2,845   —   16,561   —   —   —   —   19,406   —   19,406 
Contributions to subsidiaries from non-controlling interests  —   600   —   —   —   —   —   600   12,096   12,696 
Distributions to non-controlling interests  —   —   —   —   —   —   —   —   (1,261)  (1,261)
Total contributions by and distributions to owners  2,845   600   16,562   5,734   —   —   (34,158)  (8,417)  10,835   2,418 
Bonus issues (Note 28)  17,933   —   —   —   —   —   (17,933)  —   —   — 
Capitalization (Note 28)  8,967   —   (8,967)  —   —   —   —   —   —   — 
Changes in ownership interests in subsidiaries that do not result in a loss of control:                                        
Non-tradable shares reform  —   (986)  —   —   —   —   —   (986)  986   — 
Acquisitions of non-controlling interests of subsidiaries  —   (20)  —   —   —   —   —   (20)  (29)  (49)
Total changes in ownership interests in subsidiaries that do not result in a loss of control  —   (1,006)  —   —   —   —   —   (1,006)  957   (49)
Total transactions with owners  29,745   (406)  7,595   5,734   —   —   (52,091)  (9,423)  11,792   2,369 
Others (Note 29(g))  —   —   —   —   —   (1,994)  1,994   —   —   — 
Balance as of December 31, 2013  116,565   (33,713)  33,347   73,337   117,000   2,491   259,776   568,803   52,823   621,626 
                                         

See accompanying notes to consolidated financial statements.


F-8F-7

CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2012, 20132014, 2015 AND 20142016
(Amounts in millions)

  Share capital  Capital reserve  Share premium  
Statutory
surplus reserve
  Dis- cretionary surplus reserve  Other reserves  Retained earnings  Total equity attributable to owners of the Company  Non-controlling interests  Total equity 
  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB 
                               
Balance as of January 1, 2016  121,071   28,341   55,850   79,640   117,000   (6,781)  281,076   676,197   111,964   788,161 
Net income －  －  －  －  －  －   46,672   46,672   12,772   59,444 
Other comprehensive income (Note 10) －  －  －  －  －   7,052  －   
7,052
   (719)  6,333 
Total comprehensive income for the year －  －  －  －  －   7,052   46,672   53,724   12,053   65,777 
Transactions with owners, recorded directly in equity:                                        
Contributions by and distributions to owners:                                        
Final dividend for 2015 －  －  －  －  －  －   (7,264)  (7,264) －   (7,264)
Interim dividend for 2016 －  －  －  －  －  －   (9,565)  (9,565) －   (9,565)
Appropriation (Note 38 (c)) －  －  －  －  －  －  －  －  －  － 
Distributions to non-controlling interests －  －  －  －  －  －  －  －   (6,146)  (6,146)
Profit distribution to SAMC   (Note 1) －  －  －  －  －  －   (47)  (47)  (39)  (86)
Distribution to SAMC in the Acquisition of Gaoqiao Branch of SAMC (Note 1) －   (2,137) －  －  －  －  －   (2,137)  2,137  － 
Total contributions by and distributions to owners －   (2,137) －  －  －  －   (16,876)  (19,013)  (4,048)  (23,061)
Changes in ownership interests in subsidiaries that do not result in a loss of control:                                        
Transaction with non-controlling interests －   (30) －  －  －  －  －   (30)  263   233 
Total changes in ownership interests in subsidiaries that do not result in a loss of control －   (30) －  －  －  －  －   (30)  263   233 
Total transactions with owners －   (2,167) －  －  －  －   (16,876)  (19,043)  (3,785)  (22,828)
Others －   116  －  －  －   153   (153)  116   9   125 
Balance as of December 31, 2016  121,071   26,290   55,850   79,640   117,000   424   310,719   710,994   120,241   831,235 
  
Share
capital
  
Capital
reserve
  
Share
premium
  
Statutory
surplus
reserve
  
Dis-
cretionary
surplus
reserve
  
Other
reserves
  
Retained
earnings
  
Total equity attributable
to owners of
the Company
  
 
Non-controlling
interests
  
Total
equity
 
  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB 
 
Balance as of January 1, 2014
  116,565   (33,713)  33,347   73,337   117,000   2,491   259,776   568,803   52,823   621,626 
Net income －  －  －  －  －  －   46,466   46,466   1,467   47,933 
Other comprehensive income (Note 10) －  －  －  －  －   (7,668) －   (7,668)  (1,598)  (9,266)
Total comprehensive income for the year －  －  －  －  －   (7,668)  46,466   38,798   (131)  38,667 
Transactions with owners, recorded directly in equity:                                        
Contributions by and distributions to owners:                                        
Conversion of the 2011 Convertible Bonds (Note 24)  1,715  －   8,477  －  －  －  －   10,192  －   10,192 
Final dividend for 2013 －  －  －  －  －  －   (17,519)  (17,519) －   (17,519)
Interim dividend for 2014 －  －  －  －  －  －   (10,512)  (10,512) －   (10,512)
Appropriation (Note 29(c)) －  －  －   3,215  －  －   (3,215) －  －  － 
Contributions to subsidiaries from non-controlling interests －  －  －  －  －  －  －  －   4,155   4,155 
Distributions to non-controlling interests －  －  －  －  －  －  －  －   (1,545)  (1,545)
Total contributions by and distributions to owners  1,715  －   8,477   3,215  －  －   (31,246)  (17,839)  2,610   (15,229)
Changes in ownership interests in subsidiaries that do not result in a loss of control:                                        
Transaction with non-controlling interests (Note 34(iii)) －   3,216  －  －  －  －  －   3,216   (2,877)  339 
Total changes in ownership interests in subsidiaries that do not result in a loss of control －   3,216  －  －  －  －  －   3,216   (2,877)  339 
Total transactions with owners  1,715   3,216   8,477   3,215  －  －   (31,246)  (14,623)  (267)  (14,890)
Others (Note 29(g)) －  －  －  －  －   (1,002)  1,065   63   111   174 
Balance as of December 31, 2014  118,280   (30,497)  41,824   76,552   117,000   (6,179)  276,061   593,041   52,536   645,577 
                                         

See accompanying notes to consolidated financial statements.


F-9F-8

CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2012, 20132014, 2015 AND 20142016
(Amounts in millions)

      Years ended December 31, 
   Note  2014  2015  2016 
     RMB  RMB  RMB 
             
Net cash generated from operating activities  (a)   148,019   165,740   214,543 
Investing activities                
Capital expenditure      (113,069)  (95,495)  (65,467)
Exploratory wells expenditure      (11,334)  (7,203)  (7,380)
Purchase of investments, investments in associates and investments in joint ventures 18 and 19
20		   (16,409)  (23,440)  (16,389)
Proceeds from disposal of investments and investments in associates      3,874   3,353   33,516 
Proceeds from disposal of property, plant, equipment and other non-current assets      1,020   427   440 
(Increase) /decrease in time deposits with maturities over three months      (690)  12   (17,296)
Interest received      1,658   2,228   2,331 
Investment and dividend income received      2,629   3,399   4,028 
Net cash used in investing activities      (132,321)  (116,719)  (66,217)
Financing activities                
Proceeds from bank and other loans      1,128,447   1,090,241   506,097 
Repayments of bank and other loans      (1,114,481)  (1,152,837)  (569,091)
Contributions to subsidiaries from non-controlling interests      4,157   105,529   343 
Dividends paid by the Company      (28,031)  (24,214)  (16,876)
Distributions by subsidiaries to non-controlling interests      (1,806)  (1,481)  (6,553)
Interest paid      (9,789)  (8,145)  (6,967)
Transaction with non-controlling interests      (21) －  － 
Net cash (used in)/generated from financing activities      (21,524)  9,093   (93,047)
Net (decrease)/increase in cash and cash equivalents      (5,826)  58,114   55,279 
Cash and cash equivalents as of January 1      16,336   10,526   68,933 
Effect of foreign currency exchange rate changes      16   293   256 
Cash and cash equivalents as of December 31      10,526   68,933   124,468 
 
    Years ended December 31, 
  Note 2012  2013  2014 
    RMB  RMB  RMB 
            
Net cash generated from operating activities (a)  142,380   151,893   148,347 
Investing activities              
Capital expenditure    (145,663)  (144,972)  (113,047)
Exploratory wells expenditure    (11,403)  (9,974)  (11,334)
Purchase of investments, acquisition of subsidiaries, investments in associates and investments in joint ventures 
18 and 19
34(iv)
  (10,246)  (33,487)  (16,387)
Proceeds from disposal of investments, investments in associates and investments in joint ventures    1,384   4,198   3,874 
Proceeds from disposal of property, plant, equipment and other non-current assets    325   1,550   1,020 
Decrease / (increase) in time deposits with maturities over three months    142   353   (690)
Interest received    1,254   1,456   1,619 
Investment and dividend income received    2,429   2,136   2,312 
Purchase of derivative financial instruments, net    (419)  —   — 
Net cash used in investing activities    (162,197)  (178,740)  (132,633)
Financing activities              
Proceeds from bank and other loans    930,317   1,142,890   1,128,447 
Repayments of bank and other loans    (888,567)  (1,105,457)  (1,114,481)
Proceeds from issuing shares    —   19,406  － 
Contributions to subsidiaries from non-controlling interests    1,474   12,696   4,128 
Dividends paid by the Company    (25,486)  (28,298)  (28,031)
Distributions by subsidiaries to non-controlling interests    (2,807)  (1,346)  (1,674)
Interest paid    (9,151)  (8,323)  (9,789)
Acquisitions of non-controlling interests of subsidiaries    (152)  (49)  (21)
Net cash generated from / (used in) financing activities    5,628   31,519   (21,421)
Net (decrease) / increase in cash and cash equivalents    (14,189)  4,672   (5,707)
Cash and cash equivalents as of January 1    24,647   10,456   15,046 
Effect of foreign currency exchange rate changes    (2)  (82)  16 
Cash and cash equivalents as of December 31    10,456   15,046   9,355 
               

See accompanying notes to consolidated financial statements.
F-10F-9

CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2012, 20132014, 2015 AND 20142016
(Amounts in millions)

(a)Reconciliation of earnings before income tax to net cash generated from operating activities
(a) Reconciliation of earnings before income tax to net cash generated from operating activities
  Years ended December 31, 
  2014  2015  2016 
  RMB  RMB  RMB 
Operating activities         
Earnings before income tax  65,818   56,411   80,151 
Adjustment for:            
Depreciation, depletion and amortization  90,196   96,460   108,425 
Dry hole costs written off  5,587   6,099   7,467 
Income from associates and joint ventures  (3,865)  (8,362)  (9,306)
Investment income  (2,704)  (466)  (263)
Gain on dilution and remeasurement of interests in the Pipeline Ltd (Note 7 (iii)) －  －   (20,562)
Interest income  (1,817)  (3,010)  (3,218)
Interest expense  11,218   8,133   9,219 
(Gain)/loss on foreign currency exchange rate changes and   derivative financial instruments  (662)  3,085   86 
Loss on disposal of property, plant, equipment and other non- currents assets, net  1,622   748   1,528 
Impairment losses on assets  6,839   8,767   17,076 
Loss on embedded derivative component of the convertible bonds  4,611   259  － 
   176,843   168,124   190,603 
Net charges from:            
Accounts receivable and other current assets  (28,654)  40,910   (22,549)
Inventories  28,714   39,136   (11,364)
Accounts payable and other current liabilities  (7,331)  (68,431)  81,089 
   169,572   179,739   237,779 
Income tax paid  (21,553)  (13,999)  (23,236)
Net cash generated from operating activities  
148,019
   165,740   214,543 

  Years ended December 31, 
  2012  2013  2014 
  RMB  RMB  RMB 
Operating activities         
Earnings before income tax  90,642   95,052   65,504 
Adjustment for:            
Depreciation, depletion and amortization  70,456   81,265   90,097 
Dry hole costs written off  7,988   5,599   5,587 
Income from associates and joint ventures  (1,626)  (2,359)  (3,630)
Investment income  (235)  (154)  (2,616)
Interest income  (1,254)  (1,568)  (1,779)
Interest expense  11,217   10,602   11,218 
Gain on foreign currency exchange rate changes and derivative financial instruments  (190)  (934)  (662)
(Gain) / loss on disposal of property, plant, equipment and other non-currents assets, net  (16)  826   1,622 
Impairment losses on assets  1,014   4,044   6,839 
Loss / (gain)  on embedded derivative component of the convertible bonds  62   (2,028)  4,611 
   178,058   190,345   176,791 
Accounts receivable and other current assets  (25,593)  (7,515)  (28,654)
Inventories  (14,845)  (5,096)  28,540 
Accounts payable and other current liabilities  27,438   151   (6,777)
   165,058   177,885   169,900 
Income tax paid  (22,678)  (25,992)  (21,553)
Net cash generated from operating activities  142,380   151,893   148,347 
             
See accompanying notes to consolidated financial statements.
F-11F-10
1PRINCIPAL ACTIVITIES, ORGANIZATION AND BASIS OF PRESENTATION

Principal activities

China Petroleum & Chemical Corporation (the “Company”) is an energy and chemical company that, through its subsidiaries (hereinafter collectively referred to as the “Group”), engages in oil and gas and chemical operations in the People’s Republic of China (the “PRC”). Oil and gas operations consist of exploring for, developing and producing crude oil and natural gas; transporting crude oil and natural gas by pipelines; refining crude oil into finished petroleum products; and marketing crude oil, natural gas and refined petroleum products. Chemical operations include the manufacture and marketing of a wide range of chemicals for industrial uses.

Organization

The Company was established in the PRC on February 25, 2000 as a joint stock limited company as part of the reorganization (the “Reorganization”) of China Petrochemical Corporation (“Sinopec Group Company”), the ultimate holding company of the Group and a ministry-level enterprise under the direct supervision of the State Council of the PRC. Prior to the incorporation of the Company, the oil and gas and chemical operations of the Group were carried on by oil administration bureaux, petrochemical and refining production enterprises and sales and marketing companies of Sinopec Group Company.

As part of the Reorganization, certain of Sinopec Group Company’s core oil and gas and chemical operations and businesses together with the related assets and liabilities were transferred to the Company. On February 25, 2000, in consideration for Sinopec Group Company transferring such oil and gas and chemical operations and businesses and the related assets and liabilities to the Company, the Company issued 68.8 billion domestic state-owned ordinary shares with a par value of RMB 1.00 each to Sinopec Group Company. The shares issued to Sinopec Group Company on February 25, 2000 represented the entire registered and issued share capital of the Company as of that date. The oil and gas and chemical operations and businesses transferred to the Company were related to (i) the exploration, development and production of crude oil and natural gas, (ii) the refining, transportation, storage and marketing of crude oil and petroleum products, and (iii) the production and sales of chemicals.

Basis of preparation

Pursuant to the resolution passed at the Directors’ meeting on October 29, 2015, the Company entered into the JV Agreement with Sinopec Assets Management Corporation (“SAMC”) in relation to the formation of the Gaoqiao Petrochemical Co., Ltd. According to the JV Agreement, the Company and SAMC jointly set up Gaoqiao Petrochemical Co., Ltd. for RMB 100 million in cash in 2016. Subsequently, the Company subscribed capital contribution with the net assets of Gaoqiao Branch of the Company and SAMC subscribed capital contribution with the net assets of Gaoqiao Branch of SAMC. The capital contribution was completed on June 1, 2016, after which the Company held 55% of Gaoqiao Petrochemical Co., Ltd.’s voting rights and became the parent company of Gaoqiao Petrochemical Co., Ltd.

As Sinopec Group Company controls both the Group and SAMC, the non–cash transaction described above between Sinopec and SAMC has been accounted as business combination under the common control and it has been reflected in the accompanying consolidated financial statements as combination of entities under common control in a manner of predecessor value accounting. Accordingly, the assets and liabilities of Gaoqiao Branch of SAMC have been accounted for at historical cost, and the consolidated financial statements of the Group prior to these acquisitions have been restated to include the results of operation and the assets and liabilities of Gaoqiao Branch of SAMC on a combined basis. 

The financial condition as of December 31, 2014 and 2015 and the results of operation for the years ended December 31, 2014 and 2015 previously reported by the Group have been restated to include the results of operations and the assets and liabilities of Gaoqiao Branch of SAMC on a combined basis as set out below:

F-11


  
The Group,
as previously reported
RMB
million
  
Gaoqiao Branch of SAMC
RMB
million
  
Elimination and Adjustment*
RMB
million
  
The Group,
as restated
RMB
million
 
Summarized consolidated statement of income
for the year ended December 31, 2014：
            
Operating revenues  2,825,914   3,189   (1,537)  2,827,566 
Net income attributable to owners of the Company  46,466   314   (141)  46,639 
Net income attributable to non-controlling interests  1,467  －   141   1,608 
Basic earnings per share (RMB)  0.398   0.001  －   0.399 
Diluted earnings per share (RMB)  0.397   0.002  －   0.399 
for the year ended December 31, 2015：
                
Operating revenues  2,018,883   2,563   (1,071)  2,020,375 
Net income attributable to owners of the Company  32,438   134   (60)  32,512 
Net income attributable to non-controlling interests  11,226  －   60   11,286 
Basic earnings per share (RMB)  0.268   0.001  －   0.269 
Diluted earnings per share (RMB)  0.268   0.001  －   0.269 
Summarized consolidated balance sheet
as of December 31, 2015：
                
Current assets  332,405   1,287   (35)  333,657 
Total assets  1,443,129   4,174   (35)  1,447,268 
Current liabilities  462,642   225   (35)  462,832 
Total liabilities  658,910   232   (35)  659,107 
Total equity attributable to owners of the Company  674,029   3,942   (1,774)  676,197 
Non-controlling interests  110,190  －   1,774   111,964 

  
The Group,
as previously reported
RMB
million
  
Gaoqiao Branch of SAMC
RMB
million
  
Elimination and Adjustment*
RMB
million
  
The Group,
as restated
RMB
million
 
Summarized consolidated statement of cash flows
for the year ended December 31, 2014：
            
Net cash generated from/(used in) operating activities  148,347   (328) －   148,019 
Net cash (used in)/generated from investing activities  (132,633)  273   39   (132,321)
Net cash (used in)/generated from financing activities  (21,421)  (64)  (39)  (21,524)
Net (decrease)/increase in cash and cash equivalents  (5,707)  (119) －   (5,826)
for the year ended December 31, 2015：
                
Net cash generated from/(used in) operating activities  165,818   (79)  1   165,740 
Net cash (used in)/generated from investing activities  (116,952)  201   32   (116,719)
Net cash generated from/(used in) financing activities  9,310   (185)  (32)  9,093 
Net increase/(decrease) in cash and cash equivalents  58,176   (63)  1   58,114 

*Gaoqiao Branch of SAMC sold its chemical products and steam to the Group. The transactions between the Group and the Gaoqiao Branch of SAMC have been eliminated on combination. All other significant balances and transactions between the Group and Gaoqiao Branch of SAMC have been eliminated on combination.
At the completion date, the non–controlling interests amount to RMB 2,137 was recognized in relation to SAMC's 45% interest in Gaoqiao Branch of the Company.

The accompanying consolidated financial statements have been prepared in accordance with applicable International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). IFRS includes International Accounting Standards (“IAS”) and related interpretations.interpretations (“IFRIC”). A summary of the significant accounting policies adopted by the Group are set out in Note 2.2. The accompanying financial statements were authorized for issue by the Board of Directors on March 20, 2015.24, 2017.


F-12

(a)New and amended standards and interpretations adopted by the Group

The following relevant IFRSs, amendments to existing IFRSsIASB has not issued any new and interpretation of IFRS have been publishedamended standards and interpretations that are mandatoryfirst effective for the year beginning on or after January 1, 2014 or later periods and have been adopted by the Group in current accounting period:

Amendment to IAS 32, ‘Financial instruments: Presentation’, regardingperiod that would impact the asset and liability offsetting. The main changes are to the application guidance in IAS 32, ‘Financial instruments: Presentation’, and clarify someconsolidated financial statements of the requirements for offsetting financial assets and financial liabilities on the balance sheet.

Amendment to IAS 36, ‘Impairment of assets’ regarding recoverable amount disclosures.Group. The main change addresses the disclosure of information about the recoverable amount of impaired assets ifGroup has not adopted any new standard or interpretation that amount is based on fair value less costs of disposal.

Amendment to IAS 39, ‘Financial instruments: Recognition and measurement. This amendment provides relief from discontinuing hedge accounting when novation of a hedging instrument to a central counterparty meets specified criteria.

Adoption of IFRIC 21, ‘Levies’. IFRIC 21 addresses the accounting for a liability to pay a levy if that liability is within the scope of IAS 37 ‘Provisions, contingent liabilities and contingent assets’. The interpretation addresses what the obligating event is that gives rise to pay a levy, and when should a liability be recognized. The accounting treatment of levy of the Group conforms to the requirement of IFRIC 21. The adoption of the interpretation has had no significant effect on the financial statements for earlier periods and on the financial statementsnot yet effective for the year ended December 31, 2014.

F-12
There have been no significant changes to thecurrent accounting policies applied in these financial statements for the periods presented as a result of these developments.period.

(b)New and amended standards and interpretations not yet adopted by the Group

The following relevant IFRSs, amendments to existing IFRSs and interpretation of IFRS have been published and are mandatory for accounting periods beginning on or after January 1, 20152017 or later periods and have not been early adopted by the Group. Management is in the process of making an assessment of what the impact of these amendments, new standards and new interpretations is expected to be in the period of initial application and has so far concluded that, except for IFRS 16, the adoption of these amendments, new standards and new interpretations is unlikely to have a significant impact on the Group’s results of operations and financial position.

IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the whole of IAS 39. IFRS 9 introduces a new model for the recognition of impairment losses – the expected credit losses (ECL) model, which constitutes a change from the incurred loss model in IAS 39. IFRS 9 applies to all hedging relationships, with the exception of portfolio fair value hedges of interest rate risk. The new guidance better aligns hedge accounting with the risk management activities of an entity and provides relief from the more “rule-based” approach of IAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2018. Earlier application is permitted.

Amendments to IFRS 10 and IAS 28 on sale or contribution of assets between an investor and its associate or joint venture. The amendments address an inconsistency between IFRS 10 and IAS 28 in the sale and contribution of assets between an investor and its associate or joint venture. A full gain or loss is recognized when a transaction involves a business. A partial gain or loss is recognized when a transaction involves assets that do not constitute a business, even if those assets are in a subsidiary.

Amendment The amendments were originally intended to IFRS 11be effective for annual periods beginning on accounting for acquisitions of interests in joint operations.or after January 1, 2016. The amendment requires an investor to apply the principles of business combination accounting when it acquires an interest in a joint operation that constitutes a ‘business’ (as defined in IFRS 3, Business combinations). Specifically, an investor will need to: (1) measure identifiable assets and liabilities at fair value; (2) expense acquisition-related costs; (3) recognize deferred tax; and (4) recognize the residual as goodwill. All other principles of business combination accounting apply unless they conflict with IFRS 11. The amendment is applicable to both the acquisitioneffective date has now been deferred/removed. Early application of the initial interest and a further interest in a joint operation. The previously held interest is not remeasured when the acquisition of an additional interest in the same joint operation with joint control maintained.amendments continues to be permitted.

IFRS 15, ‘Revenue from contracts with customers’. IFRS 15, establishes a comprehensive framework for determining when to recognize revenue and how much revenue to recognize through a 5-step approach. IFRS 15 provides specific guidance on capitalization of contract cost and licence arrangements. It also includes a cohesive set of disclosure requirements about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. IFRS 15 replaces the previous revenue standards: IAS 18 ‘Revenue’ and IAS 11 ‘Construction Contracts’ and the related Interpretations on revenue recognition: IFRIC 13 ‘Customer Loyalty Programmes’, IFRIC 15 ‘Agreements for the Construction of Real Estate’, IFRIC 18 ‘Transfers of Assets from Customers’ and SIC-31 ‘Revenue—Barter‘Revenue-Barter Transactions Involving Advertising Services’. IFRS 15 is effective for annual reporting periods beginning on or after January 1, 2018, with earlier application permitted.

IFRS 16, ‘Leases’, provides updated guidance on the definition of leases, and the guidance on the combination and separation of contracts. Under IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

F-13
IFRS 16 requires lessees to recognize lease liability reflecting future lease payments and a ‘right-of-use-asset’ for almost all lease contracts, with an exemption for certain short-term leases and leases of low-value assets. The lessors accounting stays almost the same as under IAS 17 'Leases'. An entity shall apply IFRS 16 for annual reporting periods beginning on or after January 1, 2019. Earlier application is permitted if IFRS 15 is also applied.

Amendments to IAS 7, 'Statement of cash flows', the IASB has issued an amendment to IAS 7 introducing an additional disclosure that will enable users of financial statements to evaluate changes in liabilities arising from financing activities. The amendment is part of the IASB’s Disclosure Initiative, which continues to explore how financial statement disclosure can be improved. Amendments to IAS 7 are effective for annual periods beginning on or after January 1, 2017.

Amendments to IAS 12, 'Income taxes', the IASB has issued amendments to IAS 12,'Income taxes'. These amendments on the recognition of deferred tax assets for unrealized losses clarify how to account for deferred tax assets related to debt instruments measured at fair value. Amendments to IAS 12 are effective for annual periods beginning on or after January 1, 2017.

The accompanying consolidated financial statements are prepared on the historical cost basis except for the remeasurement of available-for-sale securities (Note 2(k)), securities held for trading (Note 2(k)), derivative financial instruments (Note 2(l) and (m)(n)) and derivative component of the convertible bonds (Note 2(q)2(r)) to their fair values.

The preparation of the consolidated financial statements in accordance with IFRSIFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about the carrying values of
F-13
assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Key assumptions and estimation made by management in the application of IFRSIFRSs that have significant effect on the consolidated financial statements and the major sources of estimation uncertainty are disclosed in Note 36.

Certain comparative figures have been reclassified to conform with presentation adopted in the financial statements.35.

2SIGNIFICANT ACCOUNTING POLICIES

(a)Basis of consolidation

The consolidated financial statements comprise the Company and its subsidiaries, and the Group’s interest in associates and joint ventures.

(i)Subsidiaries and non-controlling interests

Subsidiaries are those entities controlled by the Group. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

The financial statements of subsidiaries are included in the consolidated financial statements from the date that control effectively commences until the date that control effectively ceases.

Non-controlling interests at the balance sheet date, being the portion of the net assets of subsidiaries attributable to equity interests that are not owned by the Company, whether directly or indirectly through subsidiaries, are presented in the consolidated balance sheet and consolidated statement of changes in equity within equity, separately from equity attributable to the owners of the Company. Non-controlling interests in the results of the Group are presented on the face of the consolidated statement of income and

F-14
the consolidated statement of comprehensive income as an allocation of the total profit or loss and total comprehensive income for the year between non-controlling interests and the owners of the Company.

Changes in the Group’s interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within consolidated equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain or loss is recognized.

When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary, with a resulting gain or loss being recognized in profit or loss. Any interest retained in that former subsidiary at the date when control is lost is recognized at fair value and this amount is regarded as the fair value on initial recognition of a financial asset (note(Note 2(k)) or, when appropriate, the cost on initial recognition of an investment in an associate or joint venture (note 2a(ii)(Note 2(a)(ii)).

The particulars of the Group’s principal subsidiaries are set out in Note 34.33.

(ii)Associates and joint ventures

An associate is an entity, not being a subsidiary, in which the Group exercises significant influence over its management. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations each investor has rather than the legal structure of the joint arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.

Investments in associates and joint ventures are accounted for in the consolidated financial statements using the equity method from the date that significant influence or joint control commences until the date
F-14
that significant influence or joint control ceases. Under the equity method, the investment is initially recorded at cost and adjusted thereafter for the post acquisition change in the Group’s share of the investee’s net assets and any impairment loss relating to the investment (Note 2(j) and (n)(o)).

The Group’s share of the post-acquisition, post-tax results of the investees and any impairment losses for the year are recognized in the consolidated statement of income, whereas the Group’s share of the post-acquisition post-tax items of the investees’ other comprehensive income is recognized in the consolidated statement of comprehensive income.

When the Group ceases to have significant influence over an associate or joint control over a joint venture, it is accounted for as a disposal of the entire interest in that investee, with a resulting gain or loss being recognized in profit or loss. Any interest retained in that former investee at the date when significant influence or joint control is lost is recognized at fair value and this amount is regarded as the fair value on initial recognition of a financial asset (see noteNote 2(k)) or, when appropriate, the cost on initial recognition of an investment in an associate (see note 2aNote 2(a) (ii)).

(iii)
Transactions eliminated on consolidation

Inter-company balances and transactions and any unrealized gains arising from inter-company transactions are eliminated on consolidation. Unrealized gains arising from transactions with associates and joint ventures are eliminated to the extent of the Group’s interest in the entity. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

(iv)Merger accounting for common control combination

The consolidated financial statements incorporate the financial statements of the combining entities or businesses in which the common control combination occurs as if they had been combined from the date when the combining entities or businesses first came under the control of the controlling party. The net assets of the combining entities or businesses are combined using the existing book values from the controlling parties’ perspective. No amount is recognized as consideration for goodwill or excess of acquirers’ interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination, to the extent of the continuation of the controlling party’s interest.
F-15
The consolidated statement of income includes the results of each of the combining entities or businesses from the earliest date presented or since the date when the combining entities or businesses first came under the common control, where there is a shorter period, regardless of the date of the common control combination. The comparative amounts in the consolidated financial statements are presented as if the entities or businesses had been combined at the previous balance sheet date or when they first came under common control, whichever is shorter.

A uniform set of accounting policies is adopted by those entities. All intra–group transactions, balances and unrealized gains on transactions between combining entities or businesses are eliminated on consolidation. Transaction costs, including professional fees, registration fees, costs of furnishing information to shareholders, costs or losses incurred in combining operations of the previously separate businesses, etc., incurred in relation to the common control combination that is to be accounted for by using merger accounting is recognized as an expense in the period in which it is incurred.

(b)Translation of foreign currencies

The presentation currency of the Group is Renminbi. Foreign currency transactions during the year are translated into Renminbi at the applicable rates of exchange quoted by the People’s Bank of China (“PBOC”) prevailing on the transaction dates. Foreign currency monetary assets and liabilities are translated into Renminbi at the PBOC’s rates at the balance sheet date.

Exchange differences, other than those capitalized as construction in progress, are recognized as income or expenses in the “finance costs” section of the consolidated statement of income.

The results of foreign operations are translated into Renminbi at the applicable rates quoted by the PBOC prevailing on the transaction dates. Balance sheet items, including goodwill arising on consolidation of foreign operations are translated into Renminbi at the closing foreign exchange rates at the balance sheet date. The income and expenses of foreign operations are translated into Renminbi at the spot exchange rates or an exchange rate that approximents the spot exchange rates on the transaction dates. The resulting exchange differences are recognized in other comprehensive income and accumulated in equity in the other reserves.

On disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation is reclassified from equity to the consolidated statement of income when the profit or loss on disposal is recognized.

(c)Cash and cash equivalents

Cash equivalents consist of time deposits with financial institutions with an initial term of less than three months when purchased. Cash equivalents are stated at cost, which approximates fair value.

(d)Trade, bills and other receivables

Trade, bills and other receivables are initially recognized at fair value and thereafter stated at amortized cost using the effective interest method, less impairment losses for bad and doubtful debts (Note 2(n)2(o)). Trade, bills and other receivables are derecognized if the Group’s contractual rights to the cash flows from these financial assets expire or if the Group transfers these financial assets to another party without retaining control or substantially all risks and rewards of the assets.


F-15

(e)Inventories

Inventories other than spare parts and consumables, are stated at the lower of cost and net realizable value. Cost includes the cost of purchase computed using the weighted average method and, in the case of work in progress and finished goods, direct labor and an appropriate proportion of production overheads. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

Spare parts and consumables are stated at cost less any provision for obsolescence.


F-16
(f)Property, plant and equipment

An item of property, plant and equipment is initially recorded at cost, less accumulated depreciation and impairment losses (Note 2(n)2(o)). The cost of an asset comprises its purchase price, any directly attributable costs of bringing the asset to working condition and location for its intended use. The Group recognizes in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred when it is probable that the future economic benefits embodied with the item will flow to the Group and the cost of the item can be measured reliably. All other expenditure is recognized as an expense in the consolidated statement of income in the year in which it is incurred.

Gains or losses arising from the retirement or disposal of an item of property, plant and equipment, other than oil and gas properties, are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognized as income or expense in the consolidated statement of income on the date of retirement or disposal.

Depreciation is provided to write off the cost amount of items of property, plant and equipment, other than oil and gas properties, over its estimated useful life on a straight-line basis, after taking into account its estimated residual value, as follows:

Estimated usage periodEstimated residuals rate
Buildings12 to 50 years3%
Equipment, machinery and others4 to 30 years3%

Where parts of an item of property, plant and equipment have different useful lives, the cost of the item is allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if any, are reassessed annually.

(g)Oil and gas properties

The Group uses the successful efforts method of accounting for its oil and gas producing activities. Under this method, costs of development wells, the related supporting equipment and proved mineral interests in properties are capitalized. The cost of exploratory wells is initially capitalized as construction in progress pending determination of whether the well has found proved reserves. The impairment of exploratory well costs occurs upon the determination that the well has not found proved reserves. The exploratory well costs are usually not carried as an asset for more than one year following completion of drilling, unless (i) the well has found a sufficient quantity of reserves to justify its completion as a producing well if the required capital expenditure is made; (ii) drilling of the additional exploratory wells is under way or firmly planned for the near future; or (iii) other activities are being undertaken to sufficiently progress the assessing of the reserves and the economic and operating viability of the project. All other exploration costs, including geological and geophysical costs, other dry hole costs and annual lease rentals, are expensed as incurred. Capitalized costs relating toof proved oil and gas properties are amortized at the field level on a unit-of-production method. The amortization rates are determinedmethod based on oilvolumes produced and gas reserves estimated to be recoverable from existing facilities over the shorter of the economic lives of crude oil and natural gas reservoirs and the terms of the relevant production licenses.reserves.

Management estimates future dismantlement costs for oil and gas properties with reference to engineering estimates after taking into consideration the anticipated method of dismantlement required in accordance with the industry practices and the future cash flows are adjusted to reflect such risks specific to the liability, as appropriate. These estimated future dismantlement costs are discounted at a pre-tax risk-free rate and are capitalized as oil and gas properties, which are subsequently amortized as part of the costs of the oil and gas properties.


F-16

(h)Lease prepayments

Lease prepayments represent land use rights paid to the relevant government authorities. Land use rights are carried at cost less the accumulated amount charged to expense and impairment losses (Note 2(n)2(o)). The cost of lease prepayments is charged to expense on a straight-line basis over the respective periods of the rights.

(i)Construction in progress

Construction in progress represents buildings, oil and gas properties, various plant and equipment under construction and pending installation, and is stated at cost less impairment losses (Note 2(n)2(o)). Cost comprises direct costs of construction as well as interest charges, and foreign exchange differences on
F-17
related borrowed funds to the extent that they are regarded as an adjustment to interest charges, during the periods of construction.

Construction in progress is transferred to property, plant and equipment when the asset is substantially ready for its intended use.

No depreciation is provided in respect of construction in progress.

(j)Goodwill

Goodwill represents amounts arising on acquisition of subsidiaries, associates or joint ventures. Goodwill represents the difference between the cost of acquisition and the fair value of the net identifiable assets acquired.

Prior to January 1, 2008, the acquisition of the non-controlling interests of a consolidated subsidiary was accounted for using the acquisition method whereby the difference between the cost of acquisition and the fair value of the net identifiable assets acquired (on a proportionate share) was recognized as goodwill. From January 1, 2008, any difference between the amount by which the non-controlling interest is adjusted (such as through an acquisition of the non-controlling interests) and the cash or other considerations paid is recognized in equity.

Goodwill is stated at cost less accumulated impairment losses. Goodwill arising on a business combination is allocated to each cash-generating units,unit, or groups of cash generating units, that is expected to benefit the synergies of the combination and is tested annually for impairment (Note 2(n)2(o)). In respect of associates and joint ventures, the carrying amount of goodwill is included in the carrying amount of the interest in the associates or joint ventures and the investment as a whole is tested for impairment whenever there is objective evidence of impairment (Note 2(n)2(o)).

(k)Available-for-sale financial assets

Investments in available-for-sale securities are carried at fair value with any change in fair value recognized in other comprehensive income and accumulated separately in equity in other reserves. When these investments are derecognized or impaired, the cumulative gain or loss is reclassified from equity to the consolidated statement of income. Investments in equity securities, other than investments in associates and joint ventures, that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are recognized in the balance sheet at cost less impairment losses (Note 2(n)2(o)).

Investments in securities held for trading are classified as current assets. Any attributable transaction costs are recognized in the consolidated statement of income as incurred. At each balance sheet date, the fair value is remeasured, with any resultant gain or loss being recognized in the consolidated statement of income.


F-17

(l)Derivative financial instruments

Derivative financial instruments are recognized initially at fair value. At each balance sheet date, the fair value is remeasured. The gain or loss on re-measurementremeasurement to fair value is recognized immediately in the consolidated statement of income, except where the derivatives qualify for cash flow hedge accounting or the hedge of net investment in a foreign operation, in which case recognition of any resulting gain or loss depends on the nature of the item being hedged (Note 2(m)2(n)).

(m)Offsetting financial instruments

Financial assets and liabilities are presented respectively in the consolidated balance sheet, without any offset. However, they are offset and reported in the balance sheet when satisfied the following: (i) There is a legally enforceable right to offset the recognized amounts. (ii) There is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.


F-18
(n)Hedging

(i)Cash flow hedges

Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognized asset or liability or a highly probable forecast transaction or the foreign currency risk of a committed future transaction, the effective portion of any gains or losses on re-measurementremeasurement of the derivative financial instrument to fair value are recognized in other comprehensive income and accumulated separately in equity in other reserves. The ineffective portion of any gain or loss is recognized immediately in the consolidated statement of income.

If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset, or non-financial liability, the associated gain or loss is reclassified from equity to be included in the initial cost or other carrying amount of the non-financial asset or liability.asset.

If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, the associated gain or loss is reclassified from equity to the consolidated statement of income in the same period or periods during which the asset acquired or liability assumed affects the consolidated statement of income (such as when interest income or expense is recognized).

For cash flow hedges, other than those covered by the preceding two policy statements, the associated gain or loss is reclassified from equity to the consolidated statement of income in the same period or periods during which the hedged forecast transaction affects the consolidated statement of income.

When a hedging instrument expires or is sold, terminated, exercised, or the entity revokes designation of the hedge relationship but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity until the transaction occurs and it is recognized in accordance with the above policy. If the hedged transaction is no longer expected to take place, the cumulative unrealized gain or loss is reclassified from equity to the consolidated statement of income immediately.

(ii)Fair value hedges

A fair value hedge is a hedge of the exposure to changes in fair value of a recognized asset or liability or an unrecognized firm commitment, or an identified portion of such an asset, liability or unrecognized firm commitment.

The gain or loss from remeasuring the hedging instrument at fair value is recognized in profit or loss. The gain or loss on the hedged item attributable to the hedged risk adjusts the carrying amount of the hedged item and is recognized in profit or loss.

When a hedging instrument expires or is sold, terminated or exercised, or no longer meets the criteria for hedge accounting, the Group discontinues prospectively the hedge accounting treatments. If the hedged item is a financial instrument measured at amortized cost, any adjustment to the carrying amount of the hedged item is amortized to profit or loss from the adjustment date to the maturity date using the recalculated effective interest rate at the adjustment date.

(iii)Hedge of net investments in foreign operations

The portion of the gain or loss on re-measurementremeasurement to fair value of an instrument used to hedge a net investment in a foreign operation that is determined to be an effective hedge is recognized in other comprehensive income and accumulated separately in equity in other reservesreserve until the disposal of the foreign operation, at which time the cumulative gain or loss is reclassified from equity to the consolidated statement of income. The ineffective portion is recognized immediately in the consolidated statement of income. In this year noNo hedge of net investment in foreign operations was hold by the Group.Group for the year ended December 31, 2016.


F-19
(n)(o)Impairment of assets

(i)Trade accounts receivable, other receivables and investment in equity securities that do not have ana quoted market price in an active market are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. If any such evidence exists, an impairment loss is determined and recognized.

The impairment loss is measured as the difference between the asset’s carrying amount and the estimated future cash flows, discounted at the current market rate of return for a similar financial asset where the effect of discounting is material, and is recognized as an expense in the consolidated statement of income. Impairment losses for trade and other receivables are reversed through the consolidated statement of income if in a subsequent period the amount of the impairment losses decreases. Impairment losses for equity securities carried at cost are not reversed.


F-18

For investments in associates and joint ventures accounted under the equity method (Note 2(a)(ii)), the impairment loss is measured by comparing the recoverable amount of the investment as a whole with its carrying amount in accordance with the accounting policy set out in Note 2(n)2(o)(ii). The impairment loss is reversed if there has been a favorable change in the estimates used to determine the recoverable amount in accordance with the accounting policy set out in Note 2(n)2(o)(ii).

(ii)Impairment of other long-lived assets is accounted as follows:

The carrying amounts of other long-lived assets, including property, plant and equipment, construction in progress, lease prepayments and other assets, are reviewed at each balance sheet date to identify indicators that the assets may be impaired. These assets are tested for impairment whenever events or changes in circumstances indicate that their recorded carrying amounts may not be recoverable. When such a decline has occurred, the carrying amount is reduced to the recoverable amount. For goodwill, the recoverable amount is estimated at each balance sheet date.

The recoverable amount is the greater of the fair value less costs to selldisposal and the value in use. In determining the value in use, expected future cash flows generated by the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

The amount of the reduction is recognized as an expense in the consolidated statement of income. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then, to reduce the carrying amount of the other assets in the unit on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs to sell,disposal, or value in use, if determinable.

Management assesses at each balance sheet date whether there is any indication that an impairment loss recognized for a long-lived asset, except in the case of goodwill, in prior years may no longer exist. An impairment loss is reversed if there has been a favorable change in the estimates used to determine the recoverable amount. A subsequent increase in the recoverable amount of an asset, when the circumstances and events that led to the write-down or write-off cease to exist, is recognized as an income. The reversal is reduced by the amount that would have been recognized as depreciation had the write-down or write-off not occurred. An impairment loss in respect of goodwill is not reversed.

(o)(p)Trade, bills and other payables

Trade, bills and other payables are initially recognized at fair value and thereafter stated at amortized cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

(p)(q)Interest-bearing borrowings

Interest-bearing borrowings are recognized initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortized cost with any difference between cost and redemption value being recognized in the consolidated statement of income over the period of borrowings using the effective interest method.

F-20
(q)(r)Convertible bonds


(i)Convertible bonds that contain an equity component

Convertible bonds that can be converted to equity share capital at the option of the holder, where the number of shares that would be issued on conversion and the value of the consideration that would be received at that time do not vary, are accounted for as compound financial instruments that contain both a liability component and an equity component.

At initial recognition, the liability component of the convertible bonds is measured as the present value of the future interest and principal payments, discounted at the market rate of interest applicable at the time of initial recognition to similar liabilities that do not have a conversion option. Any excess of proceeds over the amount initially recognized as the liability component is recognized as the equity component. Transaction costs that relate to the issuance of the convertible bonds are allocated to the liability and equity components in proportion to the allocation of proceeds.


F-19

The liability component is subsequently carried at amortized cost. The interest expense on the liability component is calculated using the effective interest method. The equity component is recognized in the capital reserve until the bond is converted or redeemed.

If the bond is converted, the capital reserve, together with the carrying amount of the liability component at the time of conversion, is transferred to share capital and share premium as consideration for the shares issued. If the bond is redeemed, the capital reserve is transferred to share premium.

(ii)Other convertible bonds

Convertible bonds issued with a cash settlement option and other embedded derivative features are accounted for as compound financial instruments that contain a liability component and a derivative component.

At initial recognition, the derivative component of the convertible bonds is measured at fair valuevalue. Any excess of proceeds over the amount initially recognized as the derivative component is recognized as the liability component. Transaction costs that relate to the issuance of the convertible bonds are allocated to the liability and derivative components in proportion to the allocation of proceeds. The portion of the transaction costs relating to the liability component is recognized initially as part of the liability. The portion relating to the derivative component is recognized immediately as an expense in the consolidated statement of income.

The derivative component is subsequently remeasured at each balance sheet date and any gains or losses arising from change in the fair value are recognized in the consolidated statement of income. The liability component is subsequently carried at amortized cost until extinguished on conversion or redemption. The interest expense recognized in the consolidated statement of income on the liability component is calculated using the effective interest method. Both the liability and the related derivative components are presented together for financial statements reporting purposes.purposes (Note 38(g)).

If the convertible bonds are converted, the carrying amounts of the derivative and liability components are transferred to share capital and share premium as consideration for the shares issued. If the convertible bonds are redeemed, any difference between the amount paid and the carrying amounts of both components is recognized in the consolidated statement of income.

(r)(s)Provisions and contingent liability

A provision is recognized for liability of uncertain timing or amount when the Group has a legal or constructive obligation arising as a result of a past event, when it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made.

When it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the
F-21
occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

Provisions for future dismantlement costs are initially recognized based on the present value of the future costs expected to be incurred in respect of the Group’s expected dismantlement and abandonment costs at the end of related oil and gas exploration and development activities. Any subsequent change in the present value of the estimated costs, other than the change due to passage of time which is regarded as interest cost, is reflected as an adjustment to the provision and oil and gas properties.


F-20

(s)(t)Revenue recognition

Revenues associated with the sale of crude oil, natural gas, petroleum and chemical products and ancillary materials are recorded when the customer accepts the goods and the significant risks and rewards of ownership and title have been transferred to the buyer. Revenue from the rendering of services is recognized in the consolidated statement of income upon performance of the services. No revenue is recognized if there are significant uncertainties regarding recovery of the consideration due, the possible return of goods, or when the amount of revenue and the costs incurred or to be incurred in respect of the transaction cannot be measured reliably.

Interest income is recognized on a time apportioned basis that takes into account the effective yield on the asset.

A government grant that becomes receivable as compensation for expenses or losses already incurred with no future related costs is recognized as income in the period in which it becomes receivable.

(t)(u)Borrowing costs

Borrowing costs are expensed in the consolidated statements of income in the period in which they are incurred, except to the extent that they are capitalized as being attributable to the construction of an asset which necessarily takes a period of time to get ready for its intended use.

(u)(v)Repairs and maintenance expenditure

Repairs and maintenance expenditure is expensed as incurred.

(v)(w)Environmental expenditures

Environmental expenditures that relate to current ongoing operations or to conditions caused by past operations are expensed as incurred.

Liabilities related to future remediation costs are recorded when environmental assessments and / and/or cleanups are probable and the costs can be reasonablyreliably estimated. As facts concerning environmental contingencies become known to the Group, the Group reassesses its position both with respect to accrued liabilities and other potential exposures.

(w)(x)Research and development expense

Research and development expenditures are expensed in the period in which they are incurred. Research and development expense amounted to RMB 5,842,5,629, RMB 6,3355,654 and RMB 5,6235,941 for the years ended December 31, 2012, 20132014, 2015 and 2014,2016, respectively.

(x)(y)Operating leases

Operating lease payments are charged to the consolidated statement of income on a straight-line basis over the period of the respective leases.


F-22
(y)(z)Employee benefits

The contributions payable under the Group’s retirement plans are recognized as an expense in the consolidated statement of income as incurred and according to the contribution determined by the plans. Further information is set out in Note 32.31.

Termination benefits, such as employee reduction expenses, are recognized when, and only when, the Group demonstrably commits itself to terminate employment or to provide benefits as a result of voluntary redundancy by having a detailed formal plan which is without realistic possibility of withdrawal.

F-21

(z)(aa)Income tax

Income tax comprises current and deferred tax. Current tax is calculated on taxable income by applying the applicable tax rates. Deferred tax is provided using the balance sheet liability method on all temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes only to the extent that it is probable that future taxable income will be available against which the assets can be utilized. Deferred tax is calculated on the basis of the enacted tax rates or substantially enacted tax rates that are expected to apply in the period when the asset is realized or the liability is settled. The effect on deferred tax of any changes in tax rates is charged or credited to the consolidated statement of income, except for the effect of a change in tax rate on the carrying amount of deferred tax assets and liabilities which were previously charged or credited to other comprehensive income or directly in equity.

The tax value of losses expected to be available for utilization against future taxable income is set off against the deferred tax liability within the same legal tax unit and jurisdiction to the extent appropriate, and is not available for set off against the taxable profit of another legal tax unit. The carrying amount of a deferred tax asset is reviewed at each balance sheet date and is reduced to the extent that it is no longer probable that the related tax benefit will be realized.

(aa)(bb)Dividends

Dividends and distributions of profits proposed in the profit appropriation plan which will be authorized and declared after the balance sheet date, are not recognized as a liability at the balance sheet date and are separately disclosed in the notes to the financial statements. Dividends are recognized as a liability in the period in which they are declared.

(bb)(cc)Segment reporting

Operating segments, and the amounts of each segment item reported in the consolidated financial statements, are identified from the financial information provided regularly to the Group’s chief operating decision maker for the purposes of allocating resources to, and assessing the performance of the Group’s various lines of business.

F-22

3.OTHER OPERATING REVENUES

  Years ended December 31, 
  2014  2015  2016 
  RMB  RMB  RMB 
          
Sale of materials, service and others  43,627   41,524   49,812 
Rental income  674   974   909 
   44,301   42,498   50,721 
  Years ended December 31,
  2012  2013  2014 
  RMB  RMB  RMB 
Sale of materials, service and others  51,918   46,452   43,611 
Rental income  509   612   662 
   52,427   47,064   44,273 
             


F-23
4.SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

The following items are included in selling, general and administrative expenses:

 Years ended December 31, 
 Years ended December 31, 2014  2015  2016 
 2012  2013  2014  RMB  RMB  RMB 
 RMB  RMB  RMB          
Operating lease charges  11,646   14,171   14,052   14,056   14,384   14,410 
Impairment losses                        
- trade accounts receivable  44   36   44   44   40   230 
- other receivables  47   25   61   61   49   (12)
- accounts prepayments  3   (25)  13 

5.PERSONNEL EXPENSES

 Years ended December 31, 
 Years ended December 31, 2014  2015  2016 
 2012  2013  2014  RMB  RMB  RMB 
 RMB  RMB  RMB          
Salaries, wages and other benefits  45,164   48,094   49,599   49,865   48,741   55,502 
Contributions to retirement schemes (Note 32)  6,603   7,259   7,634 
Contributions to retirement schemes (Note 31)  7,660   7,878   8,385 
  51,767   55,353   57,233   57,525   56,619   63,887 
                        
6.TAXES OTHER THAN INCOME TAX

  Years ended December 31, 
  2014  2015  2016 
  RMB  RMB  RMB 
          
Consumption tax (i)  136,718   198,754   193,836 
Special oil income levy (ii)  22,187   6   - 
City construction tax  (iii)  13,754   18,195   18,155 
Education surcharge  10,212   13,686   13,695 
Resources tax (iv)  7,245   4,853   3,871 
Other  1,092   855   2,449 
   191,208   236,349   232,006 
  Years ended December 31,
  2012  2013  2014 
  RMB  RMB  RMB 
Consumption tax (i)  129,044   133,312   136,718 
Special oil income levy (ii)  29,319   25,541   22,187 
City construction tax  (iii)  12,443   13,283   13,753 
Education surcharge  9,436   10,065   10,210 
Resources tax (iv)  7,610   7,329   7,245 
Other  631   1,142   1,089 
   188,483   190,672   191,202 
Note:            

Note:

(i)Consumption tax was levied based on sales quantities of taxable products, tax rate of products is presented as below:

Products 
Effective from January 1, 2009
RMB/Ton
  
Effective from November 29,
2014
RMB/Ton
  
Effective from December 13, 2014
RMB/Ton
 
Product 
Effective from
January 1, 2009
RMB/Ton
  
Effective from
November 29, 2014
RMB/Ton
  
Effective from December 13, 2014
RMB/Ton
  
Effective from
January 13, 2015
RMB/Ton
 
Gasoline  1,388.00   1,554.56   1,943.20   1,388.00   1,554.56   1,943.20   2,109.76 
Diesel  940.80   1,105.44   1,293.60   940.80   1,105.44   1,293.60   1,411.20 
Naphtha  1,385.00   1,551.20   1,939.00   1,385.00   1,551.20   1,939.00   2,105.20 
Solvent oil  1,282.00   1,435.84   1,794.80   1,282.00   1,435.84   1,794.80   1,948.64 
Lubricant oil  1,126.00   1,261.12   1,576.40   1,126.00   1,261.12   1,576.40   1,711.52 
Fuel oil  812.00   954.10   1,116.50   812.00   954.10   1,116.50   1,218.00 
Jet fuel oil  996.80   1,171.24   1,370.60   996.80   1,171.24   1,370.60   1,495.20 

F-23

(ii)In accordance with PRC new rules and regulations, the threshold above which special oil income levy will bewas imposed (with the five-level progressive tax rates varying from 20% to 40% remaining) will behas been raised from USD 55 per barrel to USD 65 per barrel from January 1, 2015.

F-24
(iii)
City construction tax is levied on an entity based on its total paid amount of value-added tax, consumption tax and business tax.Pursuant to the 'Circular on the Overall Promotion of Pilot Program of Levying VAT in place of Business Tax'(Cai Shui [2016] 36) jointly issued by the Ministry of Finance and the State Administration of Taxation, revenue from modern service of the subsidiaries of the Group, are subject to VAT from May 1, 2016, and the applicable tax rate is 6%, while the business tax was from 3% to 5% before then.

(iv)The resources tax rate washas been raised from 5% to 6% from December 1, 2014.

7.OTHER OPERATING INCOME / (EXPENSE),EXPENSE, NET

  Years ended December 31, 
  2014  2015  2016 
  RMB  RMB  RMB 
          
Fines, penalties and compensations  (110)  (90)  (152)
Donations  (125)  (112)  (133)
Loss on disposal of property, plant, equipment and other non-currents assets, net  (1,628)  (748)  (1,528)
Impairment losses on long-lived assets (Note i)  (3,619)  (5,146)  (16,425)
Net realized and unrealized gain on derivative financial instruments not qualified as hedging  7   870   195 
Ineffective portion of change in fair value of cash flow hedges  2,260   165   304 
Government grants (Note ii)  3,289   5,131   4,101 
Gain on dilution and remeasurement of interests in the Pipeline Ltd (Note iii)  -   -   20,562 
Others  (230)  (199)  (1,238)
   (156)  (129)  5,686 
  Years ended December 31, 
  2012  2013  2014 
  RMB  RMB  RMB 
Fines, penalties and compensations  (181)  (47)  (110)
Donations  (231)  (245)  (125)
Gain / (loss) on disposal of property, plant, equipment and other non-currents assets, net  133   (826)  (1,622)
Impairment losses on long-lived assets (Note i)  (1,014)  (2,661)  (3,619)
Net realized and unrealized (loss) / gain on derivative financial instruments not qualified as hedging  (68)  56   7 
Ineffective portion of change in fair value of cash flow hedges  1   (34)  2,260 
Government grants (Note ii)  2,926   2,487   3,281 
Others  (337)  (607)  (225)
   1,229   (1,877)  (153)
             

Note:

(i)The primary factor resulting inImpairment losses recognized on long-term assets of the exploration and production (“E&P”) segment impairment losses ofsegments comprised RMB 1,006,2,436, RMB 2,5324,213 and RMB 2,43610,594 on property, plant and equipment for the years ended December 31, 2012, 20132014, 2015 and 2014,2016, respectively, was unsuccessful development drillingRMB 651 on investment in associates for the year ended December 31, 2015, RMB 1,005 on construction in progress for the year ended December 31, 2016, and RMB 6 on goodwill for the year ended December 31, 2016. The primary factors resulting in the E&P segment impairment loss for the year ended December 31, 2016 were downward revision of oil and gas reserve due to price change and high operating and development costscost for certain oil fields. The carrying values of these E&P properties were written down to respective recoverable amounts which were determined based on the present values of the expected future cash flows of the asset using a pre-tax discount rate of 12.5%10.13%, 10.70%10.80% and 10.13%10.47% for the years ended December 31, 2012, 20132014, 2015 and 2014,2016, respectively.

Impairment Further future downward revisions to the Group’s oil price outlook by 10% or more would lead to further impairments which, in aggregate, are likely to be material. It is estimated that a general decrease of 10% in oil price, with all other variables held constant, would result in additional impairment loss in E&P segment by approximately RMB 3,010 million. It is estimated that a general increase of 5% in operating cost, with all other variables held constant, would result in additional impairment loss in E&P segment by approximately RMB 1,193 million. It is estimated that a general increase of 5% in discount rate, with all other variables held constant, would result in additional impairment loss in E&P segment by approximately RMB 439 million. The primary factors resulting in th E&P segment impairment losses recognized for the chemicals segment were RMB 1,106 for the years ended December 31, 2014 and comprised of impairment losses of2015 were unsuccessful development drilling and RMB 917 on property, plant and equipment for the years ended December 31, 2014, impairment losses of RMB 10 on construction in progress for the years ended December 31, 2014, and impairment losses of RMB 179 on Intangible Assets of the year ended December 31, 2014. Impairment losses recognized for the refining segment were RMB 88 and RMB 29 for the years ended December 31, 2013 and 2014, respectively, and comprised of impairment losses of RMB 88 and RMB 29 on property, plant and equipment for the years ended December 31, 2013 and 2014, respectively. These impairment losses relate to certain refining and chemicals production facilities that are held for use. The carrying values of these facilities were written down to their recoverable amounts that were primarily determined based on the asset held for use model using the present value of estimated future cash flows of the production facilities using the pre-tax discount rates. The primary factor resulting in the impairment losses on long-lived assets of the refining and chemicals segments was due to higherhigh operating and productiondevelopment costs caused by the increase in the prices of raw materials that are not expected to be covered through an increase in selling price for the years ended December 31, 2012 and 2013 and the suspension of operations of certain production facilities for the year ended December 31, 2014.oil fields.
Impairment losses recognized for the chemicals segment were RMB 1,106 , RMB 142 and RMB 2,898 for the years ended December 31, 2014, 2015and 2016, respectively, and comprised of impairment losses of and RMB 917, RMB 142 and RMB 2,840 on property, plant and equipment for the years ended December 31, 2014, 2015 and 2016, respectively, RMB 10 and RMB 58 on construction in progress for the year ended December 31, 2014 and 2016, and RMB 179 on intangible assets of the year ended December 31, 2014. Impairment losses recognized for the refining segment were RMB 29, RMB 9 and RMB 1,245 for the years ended December 31, 2014, 2015 and 2016, on property, plant and equipment, respectively, RMB 410 on construction in progress for the year ended December 31, 2016. These impairment losses relate to certain refining and chemicals production facilities that are held for use. The carrying values of these facilities were written down to their recoverable amounts that were primarily determined based on the asset held for use model using the present value of estimated future cash flows of the production facilities using the pre-tax discount rates for the years ended December 31, 2014, 2015 and 2016, respectively. The primary factor resulting in the impairment losses on long-lived assets of the refining and chemicals segments was due to the suspension of operations of certain production facilities for the years ended December 31, 2014, 2015 and 2016.

Impairment losses recognized on long-lived assets of the marketing and distribution segment were RMB 40, RMB 19 and RMB 267 for the years ended December 31, 2014, 2015 and 2016, respectively, and comprised of impairment losses of RMB 38, RMB 10 and distribution segment were RMB 8, RMB 35 and RMB 40 for the years ended December 31, 2012, 2013 and 2014, respectively, and comprised of impairment losses of RMB 8, RMB 18 and RMB 38 on property, plant and equipment for the years ended December 31, 2012, 2013 and 2014, respectively, impairment losses of RMB 15 on construction in progress for the years ended December 31, 2013, and impairment losses of RMB 2 and RMB 2 on investments of the year ended December 31, 2013 and 2014, respectively, primarily relate to

F-24F-25
RMB 242 on property, plant and equipment for the years ended December 31, 2014, 2015 and 2016, respectively, impairment losses of RMB 2, RMB 2 and RMB 1 on investments for the years ended December 31, 2014, 2015 and 2016, respectively, impairment losses of RMB 13 on construction in progress for the year ended December 31, 2016, and impairment losses of RMB 7 and RMB 11 on lease prepayments for the year ended December 31, 2015 and 2016, primarily relate to certain service stations and certain construction in progress that were closed or abandoned during respective years. In measuring the amounts of impairment charges, the carrying amounts of these assets were compared to the present value of the expected future cash flows of the assets, as well as information about sales and purchases of similar properties in the same geographic area.
 
certain service stations and certain construction in progress that were closed or abandoned during respective years. In measuring the amounts of impairment charges, the carrying amounts of these assets were compared to the present value of the expected future cash flows of the assets, as well as information about sales and purchases of similar properties in the same geographic area.

Impairment losses recognized on long-lived assets of the corporate and others segment were RMB 15 and RMB 8 for the years ended December 31, 2013 and 2014, respectively and comprised o impairment losses of RMB 15 and RMB 8 on property, plant and equipment for the years ended December 31, 2013 and 2014, respectively.
Impairment losses recognized on long-lived assets of the corporate and others segment were RMB 8, RMB 112 for the years ended December 31, 2014 and 2015, respectively and comprised of impairment losses of RMB 8 and RMB 1 on property, plant and equipment for the years ended December 31, 2014 and 2015, respectively, and impairment of RMB 111 on construction in progress for the year ended December 31, 2015.

(ii)Government grants for the years ended December 31, 2012, 20132014, 2015 and 20142016 primarily represent financial appropriation income and non-income tax refunds received from respective government agencies without conditions or other contingencies attached to the receipts of thesethe grants.

(iii)On December 12, 2016, the Group entered into the Capital Injection Agreement in relation to Sinopec Sichuan To East China Gas Pipeline Co., Ltd. ("Pipeline Ltd"), a wholly-owned subsidiary of the Group, with China Life Insurance Company Limited ("China Life") and SDIC Communications Holding Co., Ltd. ("SDIC Holding") (the "Capital Injection Agreement"). According to the provisions of the Capital Injection Agreement, China Life and SDIC Holding made cash contribution to the Pipeline Ltd amounting to RMB 20 billion and RMB 2.8 billion, respectively, in exchange for 43.86% and 6.14% equity interest, respectively, in the Pipeline Ltd. Thereafter, the Group's equity interest in the Pipeline Ltd was diluted from 100% to 50%. Based on the composition and decision making mechanism of the Board of Directors of the Pipeline Ltd, the Group determines that it has only retained the power to participate in the financial and operating policy decisions of the Pipeline Ltd, and was no longer exclusively possessing the power to govern policy decisions of the Pipeline Ltd. Consequently, the Group has deconsolidated the Pipeline Ltd and started accounting for its 50% equity interest in the Pipeline Ltd as an investment in associate company. In this connection, the Group recognized a gain of RMB 20.562 billion, which was resulted from the dilution and the remeasurement of the remaining 50% equity interest in the Pipeline Ltd.

8.INTEREST EXPENSE
  Years ended December 31, 
  2014  2015  2016 
  RMB  RMB  RMB 
          
Interest expense incurred  11,929   8,273   9,021 
Less: Interest expense capitalized*  (1,719)  (1,221)  (859)
   10,210   7,052   8,162 
Accretion expenses (Note 27)  1,008   1,081   1,057 
Interest expense  11,218   8,133   9,219 
             
* Interest rates per annum at which borrowing costs were capitalized for construction in progress 0.7% to 7.1%  2.6% to 5.9%  2.65% to 4.82% 

  Years ended December 31, 
  2012  2013  2014 
  RMB  RMB  RMB 
Interest expense incurred  12,069   11,435   11,929 
Less: Interest expense capitalized*  (1,708)  (1,710)  (1,719)
   10,361   9,725   10,210 
Accretion expenses (Note 27)  856   877   1,008 
Interest expense  11,217   10,602   11,218 
             
* Interest rates per annum at which borrowing costs were Capitalized for construction in progress 
2.6% to 6.2
% 0.9% to 6.4% 0.7% to 7.1%
          

F-26
9.TAX EXPENSE

Tax expense in the consolidated statement of income represents:

  Years ended December 31, 
  2014  2015  2016 
  RMB  RMB  RMB 
          
Current tax         
- Provision for the year  18,341   13,677   21,313 
- Adjustment of prior years  1,022   279   228 
Deferred taxation (Note 21)  (1,792)  (1,343)  (834)
   17,571   12,613   20,707 
  Years ended December 31, 
  2012  2013  2014 
  RMB  RMB  RMB 
Current tax         
- Provision for the year  23,950   22,741   18,341 
- Adjustment of prior years  572   302   1,022 
Deferred taxation (Note 21)  (676)  1,720   (1,792)
   23,846   24,763   17,571 
             

Reconciliation between actual income tax expense and the expected income tax expense at applicable statutory tax rates is as follows:

  Years ended December 31, 
  2012  2013  2014 
  RMB  RMB  RMB 
Earnings before income tax  90,642   95,052   65,504 
Expected PRC income tax expense at a statutory tax rate of 25%  22,661   23,763   16,376 
Tax effect of preferential tax rate (Note i)  (2,080)  (1,962)  (1,722)
Effect of income taxes from foreign operations different from taxes at the PRC statutory tax rate (Note ii)  1,911   2,171   622 
Tax effect of non-deductible expenses  536   805   717 
Tax effect of non-taxable income  (707)  (1,327)  (1,126)
Tax effect of utilization of previously unrecognized tax losses and temporary differences  (190)  (575)  (27)
Tax effect of tax losses not recognized  963   660   1,595 
Write-down of deferred tax assets  180   926   114 
Adjustment of prior years  572   302   1,022 
Actual income tax expense  23,846   24,763   17,571 
             
F-25
  Years ended December 31, 
  2014  2015  2016 
  RMB  RMB  RMB 
          
Earnings before income tax  65,818   56,411   80,151 
Expected PRC income tax expense at a statutory tax rate of 25%  16,455   14,103   20,038 
Tax effect of preferential tax rate (Note i)  (1,722)  (1,033)  83 
Effect of income taxes from foreign operations different from taxes at the PRC statutory tax rate  622   391   299 
Tax effect of non-deductible expenses  717   788   1,529 
Tax effect of non-taxable income  (1,205)  (2,583)  (2,786)
Tax effect of utilization of previously unrecognized tax losses and temporary differences  (27)  (235)  (453)
Tax effect of tax losses not recognized  1,595   828   958 
Write-down of deferred tax assets  114   75   811 
Adjustment of prior years  1,022   279   228 
Actual income tax expense  17,571   12,613   20,707 

Note:

(i)The provision for PRC current income tax is based on a statutory income tax rate of 25% of the assessable income of the Group as determined in accordance with the relevant income tax rules and regulations of the PRC, except for certain entities of the Group in western regions in the PRC are taxed at preferential income tax rate of 15% through the year 2020.

(ii)It is mainly due to the foreign operation in the Republic of Angola (“Angola”) that is taxed at 50% of the assessable income as determined in accordance with the relevant income tax rules and regulations of Angola.


F-27
10.OTHER COMPREHENSIVE INCOME

  Years ended December 31, 
  2014  2015  2016 
  Before-tax amount  Tax effect  Net-of-tax amount  Before-tax amount  Tax effect  Net-of-tax amount  Before-tax amount  Tax effect  Net-of-tax amount 
  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB 
                            
Cash flow hedges:                           
Effective portion of changes in fair value of hedging instruments recognized during the year  265   (47)  218   2,881   (405)  2,476   (3,813)  652   (3,161)
Amounts transferred to initial carrying amount of hedged items  (1,013)  181   (832)  (1,354)  223   (1,131)  13   (2)  11 
Amounts transferred to the consolidated statement of income  (4,710)  839   (3,871)  2,273   (455)  1,818   6,279   (1,115)  5,164 
Net movement during the year recognized in other comprehensive income  (5,458)  973   (4,485)  3,800   (637)  3,163   2,479   (465)  2,014 
Available-for-sale securities:                                    
Changes in fair value recognized during the year  659   (146)  513   66   (4)  62   (17)  (7)  (24)
Amounts transferred to the consolidated statement of income (i)  (2,317)  579   (1,738)  –   –   –   –   –   – 
Net movement during the year recognized in other comprehensive income  (1,658)  433   (1,225)  66   (4)  62   (17)  (7)  (24)
Share of other comprehensive loss of associates and joint ventures  (3,042)  –   (3,042)  (5,356)  –   (5,356)  45   –   45 
Foreign currency translation differences  (514)  –   (514)  2,268   –   2,268   4,298   –   4,298 
Other comprehensive income  (10,672)  1,406   (9,266)  778   (641)  137   6,805   (472)  6,333 
  Years ended December 31, 
  2012  2013  2014 
  
Before-tax amount
  Tax effect  Net-of-tax amount  Before-tax amount  Tax effect  Net-of-tax amount  Before-tax amount  Tax effect  Net-of-tax amount 
  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB 
                            
Cash flow hedges:                           
Effective portion of changes in fair value of hedging instruments recognized during the year  (438)  71   (367)  1,271   (210)  1,061   265   (47)  218 
Amounts transferred to initial carrying amount of hedged items  —   —   —   (9)  1   (8)  (1,013)  181   (832)
Reclassification adjustments for amounts transferred to the consolidated statement of income  258   (42)  216   (538)  89   (449)  (4,710)  839   (3,871)
Net movement during the year recognized in other comprehensive income  (180)  29   (151)  724   (120)  604   (5,458)  973   (4,485)
Available-for-sale securities:                                    
Changes in fair value recognized during the year  26   —   26   1,747   (433)  1,314   659   (146)  513 
Reclassification adjustments for amounts transferred to the consolidated statement of income(i)  —   —   —   —   —   —   (2,317)  579   (1,738)
Net movement during the year recognized in other comprehensive income  26   —   26   1,747   (433)  1,314   (1,658)  433   (1,225)
Share of other comprehensive income/ (loss) of associates and joint ventures  80   —   80   (297)  —   (297)  (3,042) －   (3,042)
Foreign currency translation differences  (44)  —   (44)  (689)  —   (689)  (514) －   (514)
Other comprehensive income  (118)  29   (89)  1,485   (553)  932   (10,672)  1,406   (9,266)
                                     

Note:

(i)The Group sold its shares of China Gas Holdings Limited in August 2014, which was accounted for as available-for-sale financial assets prior to the transaction and the accumulated unrealized gain in other comprehensive income of RMB 2,317 was reclassified to the investment income at the completion of this transaction.

11.BASIC AND DILUTED EARNINGS PER SHARE

The calculation of basic earnings per share for the years ended December 31, 2012, 20132014, 2015 and 20142016 is based on the net income attributable to ordinary owners of the Company of RMB 63,879 ,46,639, RMB 66,13232,512 and RMB 46,466 ,46,672, respectively, and the weighted average number of the shares of 112,853,724,741, 116,102,910,373116,822,487,451, 120,852,547,200 and 121,071,209,646, respectively.

F-26

116,822,487,451, respectively. The weighted average number of shares for the year ended December 31, 2012 has been retrospectively adjusted as a result of bonus shares issuance and capitalization during the year of 2013 (Note 28) and the basic earnings and diluted earnings per share has been adjusted retrospectively. The calculation of diluted earnings per share for the years ended December 31, 2012, 20132014, 2015 and 20142016 is based on the net income attributable to ordinary owners of the Company of RMB 64,482,46,773, RMB 65,08732,510 and RMB 46,600 ,46,669, respectively, and the weighted average number of the shares of 118,412,133,133, 121,858,818,276117,242,396,710, 120,852,547,200 and 117,242,396,710,121,071,209,646,  respectively, calculated as follows:


F-28
(i)Net income attributable to ordinary owners of the Company (diluted)

  2014  2015  2016 
  RMB  RMB  RMB 
          
Net income attributable to ordinary owners of the Company  46,639   32,512   46,672 
After tax effect of interest expense (net of exchange gain) of the 2007 Convertible Bonds and the 2011 Convertible Bonds  133   –   – 
After tax effect of net loss on embedded derivative components of the 2007 Convertible Bonds and the 2011 Convertible Bonds  1   –   – 
After tax effect of employee share option scheme of Shanghai Petrochemical  –   (2)  (3)
Net income attributable to ordinary owners of the Company (diluted)  46,773   32,510   46,669 
  2012  2013  2014 
  RMB  RMB  RMB 
Net income attributable to ordinary owners of the Company  63,879   66,132   46,466 
After tax effect of interest expense (net of exchange gain) of the 2007 Convertible Bonds and the 2011 Convertible Bonds  556   476   133 
After tax effect of net loss / (gain) on embedded derivative components of the 2007 Convertible Bonds and the 2011 Convertible Bonds  47   (1,521)  1 
Net income attributable to ordinary owners of the Company (diluted)  64,482   65,087   46,600 
             


(ii)Weighted average number of shares (diluted)

  2014  2015  2016 
  Number of  Number of  Number of 
  shares  shares  shares 
Weighted average number of shares as of December 31  116,822,487,451   120,852,547,200   121,071,209,646 
Effect of conversion of the 2007 Convertible Bonds  419,909,259   –   – 
Weighted average number of shares (diluted) as of December 31  117,242,396,710   120,852,547,200   121,071,209,646 
  2012  2013  2014 
  Number of shares  Number of shares  Number of shares 
Weighted average number of shares as of December 31  112,853,724,741   116,102,910,373   116,822,487,451 
Effect of conversion of the 2007 Convertible Bonds  1,421,733,118   1,439,688,889   419,909,259 
Effect of conversion of the 2011 Convertible Bonds  4,136,675,274   4,316,219,014  － 
Weighted average number of shares (diluted) as of December 31  118,412,133,133   121,858,818,276   117,242,396,710 
             

12.TRADE ACCOUNTS RECEIVABLE, NET

  December 31, 
  2015  2016 
  RMB  RMB 
       
Amounts due from third parties  34,261   39,994 
Amounts due from Sinopec Group Company and fellow subsidiaries  18,672   6,398 
Amounts due from associates and joint ventures  3,734   4,580 
   56,667   50,972 
Less: Impairment losses for bad and doubtful debts  (525)  (683)
Trade accounts receivable, net  56,142   50,289 
         
  December 31, 
  2013  2014 
  RMB  RMB 
Amounts due from third parties  50,638   65,883 
Amounts due from Sinopec Group Company and fellow subsidiaries  9,311   20,188 
Amounts due from associates and jointly ventures  9,091   5,290 
   69,040   91,361 
Less: Impairment losses for bad and doubtful debts  (574)  (530)
Trade accounts receivable, net  68,466   90,831 
         

Impairment losses for bad and doubtful debts are analyzed as follows:

  2014  2015  2016 
  RMB  RMB  RMB 
          
Balance as of January 1  574   530   525 
Provision for the year  44   40   238 
Written back for the year  (15)  (13)  (8)
Written off for the year  (57)  (38)  (72)
Others  (16)  6   – 
Balance as of December 31  530   525   683 
  2012  2013  2014 
  RMB  RMB  RMB 
Balance as of January 1  1,012   699   574 
Provision for the year  44   36   44 
Written back for the year  (155)  (38)  (15)
Written off for the year  (202)  (123)  (57)
Other  –   –   (16)
Balance as of December 31  699   574   530 
             

Sales are generally on a cash term. Credit is generally only available for major customers with well-established trading records. Amounts due from Sinopec Group Company and fellow subsidiaries are repayable under the same terms.


F-27F-29


Trade accounts receivable (net of impairment losses for bad and doubtful debts) primarily represents receivables that are neither past due nor impaired. These receivables relate to a wide range of customers for whom there is no recent history of default.
F-28

13.INVENTORIES

  December 31, 
  2015  2016 
  RMB  RMB 
       
Crude oil and other raw materials  59,376   75,680 
Work in progress  22,762   14,141 
Finished goods  66,320   65,772 
Spare parts and consumables  1,552   1,838 
   150,010   157,431 
Less: Allowance for diminution in value of inventories  (4,402)  (920)
   145,608   156,511 
  December 31, 
  2013  2014 
  RMB  RMB 
Crude oil and other raw materials  124,198   95,298 
Work in progress  21,181   22,728 
Finished goods  76,289   71,959 
Spare parts and consumables  1,989   1,841 
   223,657   191,826 
Less: Allowance for diminution in value of inventories  (1,751)  (3,603)
   221,906   188,223 
         

Allowance for diminution in value of inventories is analyzed as follows:

  2014  2015  2016 
  RMB  RMB  RMB 
          
Balance as of January 1  1,751   3,603   4,402 
Allowance for the year  3,327   3,687   430 
Reversal of allowance on disposal  (136)  (34)  (10)
Written off  (1,327)  (2,931)  (4,021)
Other (decrease)/increase  (12)  77   119 
Balance as of December 31  3,603   4,402   920 
             
  2012  2013  2014 
  RMB  RMB  RMB 
Balance as of January 1  1,382   491   1,751 
Allowance for the year  7,419   1,453   3,327 
Reversal of allowance on disposal  (378)  (1)  (136)
Written off  (7,943)  (192)  (1,327)
Other increase  11   —   (12)
Balance as of December 31  491   1,751   3,603 
             
During the years ended December 31, 2012, 20132014, 2015 and 2014,2016, costs of inventories recognized as an expense in the consolidated statement of income were RMB 2,372,215,2,411,883, RMB 2,433,8861,572,798, and RMB 2,404,093, respectively.1,461,285, respectively. Such costs include the write-down of inventories that was primarily related to the refining, chemicals and marketing segments of RMB 7,419,3,327, RMB 1,4533,687, and RMB 3,327,430 respectively, and the reversal of write-down of inventories of RMB 378,136, RMB 134 and RMB 136, respectively.10, respectively. The write-down of inventories and the reversal of write-down of inventories were recorded in purchased crude oil, products and operating supplies and expenses in the consolidated statement of income. The write-down of inventories for the year ended December 31, 2012, 2013 and 2014 were RMB 7,943, RMB 192 and RMB 1,327, which were realized primarily with the sales of inventories.  The write-down of inventories infor the year ended December 31, 2014, was mainly due to decline of crude oi price at the end of the year.2015 and 2016 were RMB 1,327, RMB 2,931 and RMB 4,021.

14.PREPAID EXPENSES AND OTHER CURRENT ASSETS

  December 31, 
  2015  2016 
  RMB  RMB 
       
Other receivables  20,183   26,056 
Advances to suppliers  2,920   3,749 
Value-added input tax to be deducted  20,299   18,055 
Prepaid income tax  –   1,145 
Derivative financial instruments  7,875   762 
   51,277   49,767 
  December 31, 
  2013  2014 
  RMB  RMB 
Receivables  10,130   17,941 
Advances to suppliers  4,216   3,780 
Value-added input tax to be deducted  19,756   22,684 
Derivative financial instruments  4,664   12,622 
   38,766   57,027 
         


F-29F-30

15.PROPERTY, PLANT AND EQUIPMENT

  Plants and buildings  Oil and gas properties  Equipment, machinery and others  Total 
  RMB  RMB  RMB  RMB 
             
Cost:            
Balance as of January 1, 2015
  101,648   569,172   815,123   1,485,943 
Additions  268   2,899   565   3,732 
Transferred from construction in progress  4,928   39,949   74,594   119,471 
Contributed to associates and joint ventures  (4)  –   (8)  (12)
Reclassifications  1,780   (1,008)  (772)  – 
Reclassification to lease prepayments and other long-term assets  (380)  –   (1,170)  (1,550)
Exchange adjustments  112   2,201   157   2,470 
Disposals  (479)  (79)  (7,778)  (8,336)
Balance as of December 31, 2015  107,873   613,134   880,711   1,601,718 
                 
Balance as of January 1, 2016  107,873   613,134   880,711   1,601,718 
Additions  277   3,420   626   4,323 
Transferred from construction in progress  5,901   31,473   50,025   87,399 
Reclassifications  1,426   (115)  (1,311)  – 
Reclassification to lease prepayments and other long-term assets  (130)  –   (2,202)  (2,332)
Exchange adjustments  82   2,800   187   3,069 
Disposals  (509)  (27)  (35,100)  (35,636)
Balance as of December 31, 2016  114,920   650,685   892,936   1,658,541 
                 
Accumulated depreciation:                
Balance as of January 1, 2015  40,523   329,267   411,871   781,661 
Depreciation for the year  3,541   40,200   44,078   87,819 
Impairment losses for the year  32   4,213   130   4,375 
Reclassifications  679   (766)  87   – 
Contribution to associates and joint ventures  –   –   (4)  (4)
Reclassification to lease prepayments and other long-term assets  (68)  (2)  (86)  (156)
Written back on disposals  (278)  (65)  (6,533)  (6,876)
Exchange adjustments  40   1,344   66   1,450 
Balance as of December 31, 2015  44,469   374,191   449,609   868,269 
                 
Balance as of January 1, 2016  44,469   374,191   449,609   868,269 
Depreciation for the year  3,815   49,005   47,914   100,734 
Impairment losses for the year  440   10,580   3,901   14,921 
Reclassifications  369   (58)  (311)  – 
Reclassification to lease prepayments and other long-term assets  (14)  –   (316)  (330)
Written back on disposals  (534)  (22)  (17,067)  (17,623)
Exchange adjustments  27   1,865   84   1,976 
Balance as of December 31, 2016  48,572   435,561   483,814   967,947 
                 
Net book value:                
Balance as of January 1, 2015  61,125   239,905   403,252   704,282 
Balance as of December 31, 2015  63,404   238,943   431,102   733,449 
Balance as of December 31, 2016  66,348   215,124   409,122   690,594 
  Plants and buildings  Oil and gas properties  Equipment, machinery and others  Total 
  RMB  RMB  RMB  RMB 
Cost:            
Balance as of January 1, 2013
  86,215   451,288   693,583   1,231,086 
Additions  100   4,188   1,058   5,346 
Transferred from construction in progress  10,385   61,144   87,573   159,102 
Contributed to joint ventures  (2)  —   (53)  (55)
Reclassifications  1,010   10   (1,020)  — 
Reclassification to lease prepayments and other long-term assets  (252)  —   (3,329)  (3,581)
Exchange adjustments  (50)  (929)  (65)  (1,044)
Disposals  (619)  —   (9,645)  (10,264)
Balance as of December 31, 2013  96,787   515,701   768,102   1,380,590 
                 
Balance as of January 1, 2014  96,787   515,701   768,102   1,380,590 
Additions  40   3,309   579   3,928 
Transferred from construction in progress  6,164   50,130   73,857   130,151 
Contribution to a joint venture  (52)  —   (190)  (242)
Acquisitions (Note 34 (iv))  440   —   2,984   3,424 
Reclassifications  390   (6)  (384)  — 
Reclassification to lease prepayments and other long-term assets  (1,822)  (13)  (18,854)  (20,689)
Exchange adjustments  6   120   8   134 
Disposals  (863)  (69)  (12,924)  (13,856)
Balance as of December 31, 2014  101,090   569,172   813,178   1,483,440 
                 
Accumulated depreciation:                
Balance as of January 1, 2013  34,490   252,214   355,413   642,117 
Depreciation for the year  3,109   34,347   38,065   75,521 
Impairment losses for the year  23   2,520   101   2,644 
Transferred from construction in progress  516   —   —   516 
Contributed to joint ventures  (1)  —   (34)  (35)
Reclassifications  83   7   (90)  — 
Reclassification to lease prepayments and other long-term assets  (40)  —   (394)  (434)
Written back on disposals  (483)  —   (8,312)  (8,795)
Exchange adjustments  (17)  (494)  (28)  (539)
Balance as of December 31, 2013  37,680   288,594   384,721   710,995 
                 
Balance as of January 1, 2014  37,680   288,594   384,721   710,995 
Depreciation for the year  3,381   38,235   41,513   83,129 
Impairment losses for the year  21   2,436   971   3,428 
Reclassifications  130   (2)  (128)  — 
Reclassification to lease prepayments and other long-term assets  (317)  (8)  (5,117)  (5,442)
Written back on disposals  (732)  (57)  (11,441)  (12,230)
Exchange adjustment  2   69   4   75 
Balance as of December 31, 2014  40,165   329,267   410,523   779,955 
                 
Net book value:                
Balance as of January 1, 2013  51,725   199,074   338,170   588,969 
Balance as of December 31, 2013  59,107   227,107   383,381   669,595 
Balance as of December 31, 2014  60,925   239,905   402,655   703,485 
                 
Note:

The additions to the oil and gas properties of the Group for the years ended December 31, 20132015 and 20142016 included RMB 4,1882,899 and RMB 3,309,3,420, respectively, of the estimated dismantlement costs for site restoration (Note 27).


F-30F-31

16.CONSTRUCTION IN PROGRESS

  2015  2016 
  RMB  RMB 
       
Balance as of January 1  177,716   152,325 
Additions  106,809   81,837 
Dry hole costs written off  (6,099)  (7,467)
Transferred to property, plant and equipment  (119,471)  (87,399)
Reclassification to lease prepayments and other long-term assets  (5,600)  (6,900)
Impairment losses for the year  (111)  (1,486)
Disposals  (1,009)  (1,445)
Exchange adjustments  90   116 
Balance as of December 31  152,325   129,581 
         
  2013  2014 
  RMB  RMB 
Balance as of January 1  168,977   160,630 
Additions  167,605   149,830 
Acquisitions (Note 34 (iv))  —   14,162 
Dry hole costs written off  (5,599)  (5,587)
Transferred to property, plant and equipment  (158,586)  (130,151)
Reclassification to lease prepayments and other long-term assets  (11,718)  (10,154)
Impairment losses for the year  (15)  (10)
Disposals  —   (1,058)
Exchange adjustments  (34)  5 
Balance as of December 31  160,630   177,667 
         

Net changes in capitalized cost of exploratory wells included in the Group’s construction in progress in the E&P segment are analyzed as follows:

  2014  2015  2016 
  RMB  RMB  RMB 
          
At beginning of year  19,152   19,286   16,772 
Additions, net of amount that were capitalized and subsequently expensed in the same year, pending the determination of proved reserves  9,480   5,901   6,321 
Transferred to oil and gas properties based on the determination of proved reserves  (3,891)  (2,615)  (3,716)
Dry hole costs written off  (5,455)  (5,800)  (7,185)
At end of year  19,286   16,772   12,192 
  2012  2013  2014 
  RMB  RMB  RMB 
At beginning of year.  10,649   17,829   19,152 
Additions, net of amount that were capitalized and subsequently expensed in the same year, pending the determination of proved reserves  14,083   9,603   9,480 
Transferred to oil and gas properties based on the determination of proved reserves  (1,108)  (2,945)  (3,891)
Dry hole costs written off  (5,795)  (5,335)  (5,455)
At end of year  17,829   19,152   19,286 
             

Aging of capitalized exploratory well costs based on the date the drilling was completed are analyzed as follows:

  December 31, 
  2014  2015  2016 
  RMB  RMB  RMB 
          
One year or less  9,743   8,074   4,731 
Over one year  9,543   8,698   7,461 
   19,286   16,772   12,192 
  December 31, 
  2012  2013  2014 
  RMB  RMB  RMB 
One year or less  11,931   9,893   9,743 
Over one year  5,898   9,259   9,543 
   17,829   19,152   19,286 
             

Capitalized exploratory wells costs aged over one year are related to wells for which the drilling results are being further evaluated or the development plans are being formulated.

The geological and geophysical costs paid during the years ended December 31, 2012, 20132014, 2015 and 20142016 amounted to RMB 7,469,5,028, RMB 6,7354,347 and RMB 5,028,2,899, respectively.



F-31F-32

17.GOODWILL

 December31,  December 31, 
 2013  2014  2015  2016 
 RMB  RMB  RMB  RMB 
            
Cost  13,912   13,938   13,928   14,016 
Less: accumulated impairment losses  (7,657)  (7,657)  (7,657)  (7,663)
  6,255   6,281   6,271   6,353 
                
Impairment tests for cash-generating units containing goodwill

Goodwill is allocated to the following Group’s cash-generating units:

     December 31, 
    2015  2016 
Principal activities RMB  RMB 
         
Sinopec Beijing Yanshan Petrochemical Branch (“Sinopec Yanshan”) Manufacturing of intermediate petrochemical products and petroleum products  1,157   1,157 
Sinopec Zhenhai Refining and Chemical Branch (“Sinopec Zhenhai”) Manufacturing of intermediate petrochemical products and petroleum products  4,043   4,043 
Sinopec (Hong Kong) Limited Trading of petrochemical products  853   941 
Multiple units without individually significant goodwill    218   212 
     6,271   6,353 
  December 31, 
  2013  2014 
  RMB  RMB 
Sinopec Beijing Yanshan Branch (“Sinopec Yanshan”)  1,157   1,157 
Sinopec Zhenhai Refining and Chemical Branch (“Sinopec Zhenhai”)  4,043   4,043 
Sinopec (Hong Kong) Limited  853   853 
Multiple units without individually significant goodwill  202   228 
   6,255   6,281 
         

Goodwill represents the excess of the cost of purchase over the fair value of the underlying assets and liabilities. The recoverable amounts of the above cash generating units are determined based on value in use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a one-year period and pre-tax discount rates primarily ranging from 11.5%10.7% to 12.7%11.3% and 10.0%10.4% to 10.9%11.0% for the years ended December 31, 20132015 and 2014,2016, respectively. Cash flows beyond the one-year period are maintained constant. Based on the estimated recoverable amount, no impairment loss was recognized.

Key assumptions used for cash flow forecasts for these entities are the gross margin and sales volume. Management determined the budgeted gross margin based on the gross margin achieved in the period immediately before the budget period and management’s expectation on the future trend of the prices of crude oil and petrochemical products. The sales volume was based on the production capacity and/or the sales volume in the period immediately before the budget period.

F-33
18.INTEREST IN ASSOCIATES


The Group’s investments in associates are with companies primarily engaged in the oil and gas, petrochemical, and marketing and distribution operations in the PRC.

The Group’s principal associates all of which are unlisted companies incorporated and operating their business principally in the PRC, are as follows:

Name of companyForm of business structureParticulars of issued and paid up capitalPercentage of equity held by the CompanyPercentage of equity held by the Company’s subsidiariesPrincipal activities
%%
Sinopec Finance Company Limited ("Sinopec Finance")
IncorporatedRegistered capital RMB 10,00049.00—Provision of non-banking financial services
China Aviation Oil Supply Company Limited ("China Aviation Oil")IncorporatedRegistered capital RMB 3,800—29.00Marketing and distribution of refined petroleum products
Zhongtian Synergetic Energy Company Limited ("Zhongtian Synergetic Energy")IncorporatedRegistered capital RMB 16,000—38.75Manufacturing of coal-chemical products
Name of company Form of business structure Particulars of issued and paid up capital Percentage of equity held by the Company Percentage of equity held by the Company’s subsidiaries Principal activities Country of incorporation Principal place of business
      % %      
Sinopec Sichuan to East China Gas Pipeline Co., Ltd. ("Pipeline Ltd") Incorporated Registered capital RMB 200 – 50.00 Operation of natural gas pipelines and auxiliary facilities PRC PRC
Sinopec Finance Company Limited ("Sinopec Finance")
 Incorporated Registered capital RMB 10,000 49.00 – Provision of non-banking financial services PRC PRC
Zhongtian Synergetic Energy Company Limited ("Zhongtian Synergetic Energy") Incorporated Registered capital RMB 16,000 – 38.75 Manufacturing of coal-chemical products PRC PRC
China Aviation Oil Supply Company Limited ("China Aviation Oil") Incorporated Registered capital RMB 3,800 – 29.00 Marketing and distribution of refined petroleum products PRC PRC
Caspian Investments Resources Ltd. ("CIR") (i) Incorporated Registered capital USD 10,000 – 50.00 Crude oil and natural gas  extraction British Virgin Islands The Republic of Kazakhstan


F-32


Shanghai Chemical Industry Park Development Company Limited ("Shanghai Chemical")IncorporatedRegistered capital RMB 2,372—38.26Planning, development and operation of the Chemical Industry Park in Shanghai, the PRC
Shanghai Petroleum Company Limited ("Shanghai Petroleum")IncorporatedRegistered capital RMB 90030.00—Exploration and production of crude oil and natural gas
Summarized financial information and reconciliation to their carrying amounts in respect of the Group’s principal associates:

  Pipeline Ltd (ii)  Sinopec Finance  Zhongtian Synergetic Energy  China Aviation Oil  CIR (i) 
  December 31,  December 31,  December 31,  December 31,  December 31, 
  2016  2015  2016  2015  2016  2015  2016  2015  2016 
  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB 
Current assets  11,835   154,437   149,457   10,168   7,292   8,240   13,115   4,826   5,120 
Non-current assets  25,395   15,739   16,478   37,571   50,301   5,220   5,671   7,768   3,842 
Current liabilities  (5,009)  (147,952)  (142,386)  (16,536)  (8,078)  (4,717)  (6,297)  (1,305)  (928)
Non-current liabilities  (4)  (114)  (88)  (15,407)  (32,137)  (321)  (417)  (1,282)  (883)
Net assets  32,217   22,110   23,461   15,796   17,378   8,422   12,072   10,007   7,151 
Net assets attributable to owners of the Company  32,217   22,110   23,461   15,796   17,378   7,438   10,743   10,007   7,151 
Net assets attributable to non-controlling interests  –   –   –   –   –   984   1,329   –   – 
Share of net assets  from associates  16,109   10,834   11,496   6,121   6,734   2,157   3,115   5,004   3,576 
Others (iii)  6,691   –   –   –   –   –   –   –   – 
Carrying Amounts  22,800   10,834   11,496   6,121   6,734   2,157   3,115   5,004   3,576 


  Sinopec Finance China Aviation Oil Zhongtian Synergetic Energy Shanghai Chemical Shanghai Petroleum
  December 31, December 31, December 31, December 31, December 31,
  2013  2014  2013  2014  2013  2014  2013  2014  2013  2014 
  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB 
Current assets  104,477   108,999   15,410   13,816   4,474   6,833   3,094   2,466   2,849   2,783 
Non-current assets  17,490   14,992   4,830   4,996   6,987   15,849   2,601   2,819   1,058   1,126 
Current liabilities  (102,112)  (105,289)  (12,249)  (11,051)  (335)  (7,538)  (1,183)  (640)  (281)  (224)
Non-current liabilities  (3,271)  (104)  (233)  (227)  (1,330)  (2,348)  (1,102)  (1,043)  (354)  (370)
Net assets  16,584   18,598   7,758   7,534   9,796   12,796   3,410   3,602   3,272   3,315 
Net assets attributable to non-controlling interests  —   —   899   877   —   —   —   —   —   — 
Net assets attributable to owners of the Company  16,584   18,598   6,859   6,657   9,796   12,796   3,410   3,602   3,272   3,315 
Share of net assets from associates  8,126   9,113   1,989   1,998   3,796   4,958   980   1,043   982   995 
Carrying Amounts  8,126   9,113   1,989   1,998   3,796   4,958   980   1,043   982   995 
F-34

Summarized statement of comprehensive income

Year ended December 31 Pipeline Ltd (ii, iv)  Sinopec Finance  Zhongtian Synergetic Energy(v)  China Aviation Oil  CIR(i) 
  2016  2014  2015  2016  2014  2015  2016  2014  2015  2016  2015  2016 
  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB 
Operating revenues  191   2,706   2,533   2,442   –   –   –   115,725   78,623   74,622   687   2,205 
Net income for the year  51   2,522   3,484   1,526   –   –   –   1,097   2,248   3,630   (90)  (3,518)
Other comprehensive income  –   (508)  28   (175)  –   –   –   –   –   –   (4,017)  662 
Total comprehensive income  51   2,014   3,512   1,351   –   –   –   1,097   2,248   3,630   (4,107)  (2,856)
Dividends declared by associates  23   –   –   –   –   –   –   309   336   –   –   – 
Share of  net income/(loss) from associates  26   1,236   1,707   748   –   –   –   318   495   892   (45)  (1,759)
Share of other comprehensive income from associates  –   (249)  14   (86)  –   –   –   –   –   –   (2,009)  331 
Year ended December 31 Sinopec Finance China Aviation Oil Zhongtian Synergetic Energy(i) Shanghai Chemical Shanghai Petroleum
  2012  2013  2014  2012  2013  2014  2012  2013  2014  2012  2013  2014  2012  2013  2014 
  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB   RMB  RMB  RMB  RMB  RMB  RMB 
Operating revenues  3,329   2,893   2,706   102,467   111,023   115,725   —   —   —   6   6   1   1,069   948   1,005 
Net income for the year  1,374   1,409   2,522   1,790   2,027   1,097   (47)  —   —   143   124   222   209   66   163 
Other comprehensive income / (loss)  160   (608)  (508)  —   —   —   —   —   —   —   —   —   —   —   — 
Total comprehensive income  1,534   801   2,014   1,790   2,027   1,097   (47)  —   —   143   124   222   209   66   163 
Dividends declared by associates  —   —   —   414   444   309   —   —   —   —   17   11   90   60   36 
Share of net income / (loss) from associates  673   690   1,236   442   513   318   (18)  —   —   55   47   85   63   20   49 
Share of other comprehensive income / (loss) from associates  79   (298)  (249)  —   —   —   —   —   —   —   —   —   —   —   — 

The share of net income for years ended December 31, 2014, 2015 and 2016 in all individually immaterial associates accounted for using equity method in aggregate were RMB 1,498, RMB 1,418 and RMB 1,977, respectively.

The share of other comprehensive loss for the years ended December 31, 2014, 2015 and 2016 in all individually immaterial associates accounted for using equity method in aggregate were RMB 57, RMB 632 and RMB 384, respectively.

The carrying amount as of December 31, 2015 and 2016 of all individually immaterial associates accounted for using equity method in aggregate were RMB 16,596 and RMB 18,395, respectively.

Note:

(i)In August 2015, one of the subsidiaries of Sinopec Group Company completed the acquisition from LUKOIL OVERSEAS WEST PROJECT Ltd. a 50% equity interests in CIR and revised CIR's Articles of Association subsequently. According to the revised CIR's Articles of Association, the Group retained significant influences over CIR. As a result, the Group reclassified the investment interest in CIR from joint ventures to associates. The summarized statement of comprehensive income for the year ended December 31, 2015 of CIR represents the operating result for the period from the date when the Group reclassified the investment interest in CIR from joint ventures to associates to December 31, 2015.

(ii)Management is in the process of allocating the fair value to identifiable assets and liabilities of Pipeline Ltd, therefore the summarized financial information of Pipeline Ltd is based on management's preliminary fair value allocation which may be subject to further change.

(iii)Other reflects the excess of fair value of the consideration transferred over the Group's share of the fair value of the investee's identifiable assets and liabilities as of the transaction date.

(iv)The summarized statement of comprehensive income of Pipeline Ltd represents the operating results of the Pipeline Ltd for the period from the date when the Group lost control to December 31, 2016 (Note 7(iii)).

(v)The main assetsasset of Zhongtian Synergetic Energy was under construction during the year ended December 31, 2012, 20132014, 2015 and 2014.2016.

The share of net income for the years ended December 31, 2012, 2013 and 2014 in all individually immaterial associates accounted for using equity method in aggregate were RMB 1,215, RMB 751 and RMB 1,160, respectively.

The share of other comprehensive income / (loss) for the years ended December 31, 2012, 2013 and 2014 in all individually immaterial associates accounted for using equity method in aggregate were RMB 1, RMB 1 and loss of RMB 57, respectively.


F-33F-35
The carrying amount as of December 31, 2013 and 2014 of all individually immaterial associates acoounted for using equity method in aggregate were RMB 12,571 and RMB 14,012, respectively.
19.INTEREST IN JOINT VENTURES

The Group’s principal interests in joint ventures which are incorporated companies are as follows:

Name of company Country of incorporation Particulars of issued and paid up capital Percentage of equity held by the Company  Percentage of equity held by the Company’s subsidiaries  Principal activities Principal Place of Business
      %  %    
Yanbu Aramco Sinopec Refining Company Ltd. ("YASREF")(i)
 Saudi Arabia Registered capital USD 1,560  —   37.50 Petroleum refining and processing business Saudi Arabia
BASF-YPC Company Limited ("BASF-YPC")
 PRC Registered capital RMB 12,343  30.00   10.00 Manufacturing and distribution of petrochemical products PRC
Caspian Investments Resources Ltd. ("CIR")(ii)
 British Virgin Islands Registered capital USD 10,000  —   50.00 Crude oil and natural gas extraction Kazakhstan
Taihu Limited ("Taihu")(ii)
 Cyprus Registered capital USD 25,000  —   49.00 Crude oil and natural gas extraction Russia
Mansarovar Energy Colombia Ltd. ("Mansarovar")(ii)
 British Bermuda Registered capital USD 12,000  —   50.00 Crude oil and natural gas extraction Colombia
Name of company Country of incorporation Particulars of issued and paid up capital Percentage of equity held by the Company 
Percentage of equity held by the Company’s
subsidiaries
 Principal activities Principal place of business
      % %    
Fujian Refining & Petrochemical Company Limited (“FREP”) PRC Registered capital RMB 14,758 – 50.00 Manufacturing refining oil products PRC
BASF-YPC Company Limited (“BASF-YPC”)
 PRC Registered capital RMB 12,547 30.00 10.00 Manufacturing and distribution of petrochemical products PRC
Mansarovar Energy Colombia Ltd. (“Mansarovar”)
 British Bermuda Registered capital USD 12,000 – 50.00 Crude oil and natural gas extraction Colombia
Taihu Limited (“Taihu”)
 Cyprus Registered capital USD 25,000 – 49.00 Crude oil and natural gas extraction Russia
Yanbu Aramco Sinopec Refining Company Ltd. (“YASREF”)(i)
 Saudi Arabia Registered capital USD 1,560 million – 37.50 Petroleum refining and processing business Saudi Arabia

Summarized balance sheet and reconciliation to their carrying amounts in respect of the Group’s principal joint ventures:

  FREP  BASF-YPC  Mansarovar  Taihu  YASREF 
  December 31,  December 31,  December 31,  December 31,  December 31, 
  2015  2016  2015  2016  2015  2016  2015  2016  2015  2016 
  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB 
Current assets                              
Cash and cash equivalents  2,517   8,172   488   1,394   262   499   78   1,165   4,171   1,259 
Other current assets  7,396   10,269   4,765   4,852   759   569   2,243   1,616   5,965   6,826 
Total current assets  9,913   18,441   5,253   6,246   1,021   1,068   2,321   2,781   10,136   8,085 
Non-current assets  25,585   21,903   15,543   13,530   7,433   4,050   5,662   8,279   54,027   57,054 
Current liabilities                                        
Current financial liabilities (iii)  (1,424)  (1,781)  (2,005)  (783)  –   –   (2,315)  (334)  (3,362)  (1,187)
Other current liabilities  (3,116)  (4,643)  (1,864)  (2,107)  (767)  (599)  (1,088)  (1,616)  (7,886)  (6,466)
Total current liabilities  (4,540)  (6,424)  (3,869)  (2,890)  (767)  (599)  (3,403)  (1,950)  (11,248)  (7,653)
Non-current liabilities                                        
Non-current financial liabilities (iv)  (21,906)  (19,985)  (3,113)  (1,492)  –   –   (26)  (49)  (39,214)  (43,028)
Other non-current liabilities  (271)  (252)  –   (10)  (3,320)  (895)  (1,337)  (2,130)  (978)  (1,004)
Total non-current liabilities  (22,177)  (20,237)  (3,113)  (1,502)  (3,320)  (895)  (1,363)  (2,179)  (40,192)  (44,032)
Net assets  8,781   13,683   13,814   15,384   4,367   3,624   3,217   6,931   12,723   13,454 
Net assets attributable to owners of the company  8,781   13,683   13,814   15,384   4,367   3,624   3,106   6,690   12,723   13,454 
Net assets attributable to non-controlling interests  –   –   –   –   –   –   111   241   –   – 
Share of net assets from joint ventures  4,391   6,842   5,526   6,154   2,184   1,812   1,522   3,278   4,771   5,045 
Other (v)  –   –   –   –   –   –   729   743   –   – 
Carrying Amounts  4,391   6,842   5,526   6,154   2,184   1,812   2,251   4,021   4,771   5,045 
  BASF-YPC CIR (ii) Taihu (ii) Mansarovar (ii)
  
December 31,
2013
  
December31,
2014
  
December 31,
2013
  
December31,
2014
  
December 31,
2013
  
December31,
2014
  
December 31,
2013
  
December31,
2014
 
  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB 
Current assets                        
Cash and cash equivalents  550   1,112   4,820   4,873   166   117   346   580 
Other current assets  6,727   5,879   2,437   1,881   3,476   2,886   985   328 
Total current assets  7,277   6,991   7,257   6,754   3,642   3,003   1,331   908 
Non-current assets  18,496   17,209   14,244   13,078   14,796   7,995   10,739   9,702 
Current liabilities                                
Current financial liabilities (iii)  (2,990)  (3,318)  (278)  (272)  (6,903)  (1,228)  (854)  — 
Other current liabilities  (2,027)  (2,235)  (1,764)  (851)  (2,065)  (1,742)  (776)  (860)
Total current liabilities  (5,017)  (5,553)  (2,042)  (1,123)  (8,968)  (2,970)  (1,630)  (860)
Non-current liabilities                                
Non-current financial liabilities (iv)  (4,904)  (4,019)  (956)  (680)  —   (2,905)  —   — 
Other non-current liabilities  (1)  —   (1,545)  (1,253)  (3,354)  (2,175)  (4,120)  (3,662)
Total non-current liabilities  (4,905)  (4,019)  (2,501)  (1,933)  (3,354)  (5,080)  (4,120)  (3,662)
Net assets  15,851   14,628   16,958   16,776   6,116   2,948   6,320   6,088 
Net assets attributable to non-controlling interests  —   —   —   —   211   102   —   — 
Net assets attributable to owners of the company  15,851   14,628   16,958   16,776   5,905   2,846   6,320   6,088 
Share of net assets from joint ventures  6,340   5,851   8,479   8,388   2,893   1,395   3,160   3,044 
Other (v)  —   —   579   616   1,455   814   3   85 
Carrying Amounts  6,340   5,851   9,058   9,004   4,348   2,209   3,163   3,129 


F-36
Summarized statement of comprehensive income

 FREP BASF-YPC Mansarovar Taihu YASREF(i) CIR (ii) 
Year ended December 31, 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2015 2016 2014 2015 
  RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB 
Operating revenues  70,346  48,758  41,764  22,191  15,430  17,323  3,781  1,876  1,363  18,183  10,725  9,658  31,823  41,286  8,366  1,821 
Depreciation, depletion and amortization  (52) (53) (52) (15,649)��(2,312) (2,275) (1,870) (782) (996) (1,501) (1,279) (1,043) (1,915) (2,754) (2,632) (1,248)
Interest income  28  33  130  26  29  19  31  9  174  –  –  40  13  33  8  64 
Interest expense  (1,263) (1,130) (929) (356) (239) (173) –  (15) (192) (54) (119) (113) (721) (1,216) –  (20)
(Loss)/earning before income tax  (1,628) 3,857  6,476  373  214  2,606  641  (1,847) (1,316) 3,014  3,455  2,411  (259) 28  7  870 
Tax expense  244  (918) (1,574) (94) (56) (648) (897) (333) 303  (809) (733) (518) 13  56  (252) (367)
Net (loss)/income for the year  (1,384) 2,939  4,902  279  158  1,958  (256) (2,180) (1,013) 2,205  2,722  1,893  (246) 84  (245) 503 
Other comprehensive income  –  –  –  –  –  –  24  290  270  (5,373) (2,633) 1,851  738  647  63  (3,164)
Total comprehensive income  (1,384) 2,939  4,902  279  158  1,958  (232) (1,890) (743) (3,168) 89  3,744  492  731  (182) (2,661)
Dividends declared by a joint venture  –  –  –  933  470  155  –  –  –  –  –  –  –  –  –  – 
Share of net (loss)/income from joint ventures  (692) 1,470  2,451  112  63  783  (128) (1,090) (506) 1,043  1,287  895  (92) 31  (123) 252 
Share of other comprehensive income from joint ventures  –  –  –  –  –  –  12  145  134  (2,541) (1,245) 875  277  243  32  (1,582)


The share of net income for the year ended December 31, 2014, 2015 and 2016 in all individually immaterial joint ventures accounted for using equity method in aggregate were RMB 601, RMB 2,897 and RMB 3,768, respectively.

The share of other comprehensive loss for the years ended December 31, 2014, 2015 and 2016 in all individually immaterial joint ventures accounted for using equity method in aggregate were RMB 239, RMB 324 and RMB 1,068, respectively.

The carrying amount as of year ended December 31, 2015 and 2016 of all individually immaterial joint ventures accounted for using equity method in aggregate were RMB 24,458 and RMB 26,822, respectively.

Note:

(i)
Pursuant to the resolution passed at the Directors' meeting held on October 31, 2014 and the purchase agreement entered into with relevant vendors, the Group completed the acquisition from the Sinopec Group Company a 37.5% equity interests in YASREF for a consideration of approximately USD 562 million (approximately(approximately RMB 3,439) and also injected capital of approximately USD 199 million (approximately RMB 1,216) to YASREF on December 31, 2014.

F-34

As the purchase price allocation has not been completed, the summarized financial information for YASREF is not disclosed.

(ii)The Group acquired from the Sinopec Group Company 50%summarized statement of equity interests of Mansarovar in November 2013, 50% of equity interestscomprehensive income of CIR and 49% of equity interests of Taihurepresents the operating result for the period from January 1, 2015 to the date when the Group reclassified the investment interest in December 2013.CIR from joint ventures to associates (Note 18(i)).

(iii)Excluding trade accounts payable and other payables.

(iv)Excluding provisions.

(v)Other reflects the excess of fair value of the consideration transferred over the netGroup's share of the fair value of the investee's identifiable assets acquired and liabilities assumed as of the acquisition date.

Summarized statement of comprehensive income

Year ended December 31,
 BASF-YPC CIR (ii) Taihu (ii) Mansarovar (ii)
  2012  2013  2014  2014  2014  2013  2014 
   RMB  RMB  RMB  RMB  RMB  RMB  RMB 
Operating revenues  22,938   23,176   22,191   8,366   18,183   360   3,781 
Depreciation, depletion and amortization  (1,983)  (2,147)  (15,649)  (2,632)  (1,501)  (88)  (1,870)
Interest income  28   20   26   8   —   —   31 
Interest expense  (388)  (319)  (356)  —   (54)  (7)  — 
Earning before income tax  939   1,060   373   7   3,014   130   641 
Tax expense  (240)  (279)  (94)  (252)  (809)  (50)  (897)
Net income for the year  699   781   279   (245)  2,205   80   (256)
Other comprehensive income / (loss)  —   —   —   63   (5,373)  —   24 
Total comprehensive income / (loss)  699   781   279   (182)  (3,168)  80   (232)
Dividends declared by a joint venture  1,061   —   933   —   —   —   — 
Share of net income / (loss) from joint ventures  280   312   112   (123)  1,043   40   (128)
Share of other comprehensive income / (loss) from joint ventures  —   —   —   32   (2,541)  —   12 

F-37
The share of net income / (loss) for the years ended December 31, 2012, 2013 and 2014 in all individually immaterial joint ventures accounted for using equity method in aggregate were RMB 24, a loss of RMB 14 and a loss of RMB 122, respectively.

The share of other comprehensive income / (loss) for the years ended December 31, 2012, 2013 and 2014 in all individually immaterial joint ventures accounted for using equity method in aggregate were RMB 79, RMB nil and a loss of RMB 239, respectively.

The carrying amount as of December 31, 2013 and 2014 of all individually immaterial joint ventures accounted for using equity method in aggregate were RMB 23,965 and RMB 28,281, respectively.
20.AVAILABLE-FOR-SALE FINANCIAL ASSETS

  December 31, 
  2013  2014 
  RMB  RMB 
Equity securities, listed and at quoted market price (Note 10(i))  1,964   183 
Other investment, unlisted and at cost  1,834   714 
   3,798   897 
Less: Impairment losses for investments  (68)  (29)
   3,730   868 
         
F-35

  December 31, 
  2015  2016 
  RMB  RMB 
Equity securities, listed and at quoted market price  261   262 
Other investment, unlisted and at cost  10,732   11,175 
   10,993   11,437 
Less: Impairment losses for investments  (29)  (29)
   10,964   11,408 

Other investment, unlisted and at cost, representrepresents the Group’s interests in PRC privately owned enterprises which are mainly engaged in non-oiloil and natural gas activities and operations.chemical production.

The impairment losses relating to investments for the years ended December 31, 20132015 and 20142016 amounted to RMB 2nil and RMB nil, respectively.

21.DEFERRED TAX ASSETS AND LIABILITIES

Deferred tax assets and deferred tax liabilities before offset are attributable to the items detailed in the table below:

  Assets  Liabilities  Net balance 
  December 31,  December 31,  December 31, 
  2015  2016  2015  2016  2015  2016 
  RMB  RMB  RMB  RMB  RMB  RMB 
Current                  
Receivables and inventories  1,755   347  －  －   1,755   347 
Accruals  413   391  －  －   413   391 
Cash flow hedges  348   27   (98)  (242)  250   (215)
Non-current                        
Property, plant and equipment  8,209   11,264   (17,340)  (14,615)  (9,131)  (3,351)
Tax losses carried forward  5,883   2,477  －  －   5,883   2,477 
Others  98   133   (58)  (229)  40   (96)
Deferred tax assets/(liabilities)  16,706   14,639   (17,496)  (15,086)  (790)  (447)
  Assets  Liabilities  Net balance 
  December 31,  December 31,  December 31, 
  2013  2014  2013  2014  2013  2014 
  RMB  RMB  RMB  RMB  RMB  RMB 
Current                  
Receivables and inventories  3,315   2,883   —  －   3,315   2,883 
Accruals  357   258   —  －   357   258 
Cash flow hedges  34   887   (120) －   (86)  887 
Non-current                       
Property, plant and equipment  7,200   7,752   (15,590)  (16,387)  (8,390)  (8,635)
Tax losses carried forward  2,261   3,474   —  －   2,261   3,474 
Embedded derivative component of the convertible bonds  —   282   (870) －   (870)  282 
Available-for-sale securities  —   7   (436)  (4)  (436)  3 
Others  99   86   (86)  (79)  13   7 
Deferred tax assets / (liabilities)  13,266   15,629   (17,102)  (16,470)  (3,836)  (841)
                         

As of December 31, 2013 and 2014,2015and 2016, certain subsidiaries of the Company did not recognize deferred tax of deductabledeductible loss carried forward of RMB 10,80919,338 and RMB 17,085,19,194, respectively, of which RMB 2,6384,080 and RMB 6,9963,833 were incurred for the years ended December 31, 2013 and 2014,2015and 2016, respectively, because it was not probable that the related tax benefit will be realized. Those deductabledeductible tax losses carried forward of RMB 325,3,777, RMB 3,344,2,634, RMB 3,7864,870, RMB 4,080 and RMB 2,634 and RMB 6,9963,833 will expire in 2015, 2016, 2017,, 2018, 2019, 2020, 2021 and after, respectively.

Periodically, management performed assessment on the probability that future taxable profit will be available over the period which the deferred tax assets can be realized or utilized. In assessing the probability, both positive and negative evidence was considered, including whether it is probable that the operations will have sufficient future taxable profits over the periods which the deferred tax assets are deductible or utilized and whether the tax losses result from identifiable causes which are unlikely to recur. During the years ended December 31, 20132015 and 2014,2016, write-down of deferred tax assets amounted to RMB 92675 and RMB 114811 related to the expiration of tax loss, respectively.

respectively.


F-36F-38

Movements in deferred tax assets and liabilities are as follows:

  Balance as of January 1, 2014  Recognized in consolidated statement of income  Recognized in other comprehensive income  Others  Balance as of December 31, 2014 
  RMB  RMB  RMB  RMB  RMB 
                
Current               
Receivables and inventories  3,315   (432) －  －   2,883 
Accruals  357   (99) －  －   258 
Cash flow hedges  (86) －   973  －   887 
Non-current                   
Property, plant and equipment  (8,390)  (42)  (21)  (182)  (8,635)
Tax losses carried forward  2,261   1,213  －  －   3,474 
Embedded derivative component of the convertible bonds  (870)  1,152  －  －   282 
Available-for-sale securities  (436)  6   433  －   3 
Others  13   (6) －  －   7 
Net deferred tax liabilities  (3,836)  
1,792
   1,385   (182)  (841)
  Balance as of January 1, 2012  Recognized in consolidated statement of income  Recognized in other comprehensive income  Balance as of December 31, 2012 
  RMB  RMB  RMB  RMB 
             
Current            
Receivables and inventories  3,105   187   —   3,292 
Accruals  1,844   (1,423)  —   421 
Cash flow hedges  7   —   29   36 
Non-current                
Property, plant and equipment  (8,622)  413   15   (8,194)
Tax losses carried forward  1,550   1,501   —   3,051 
Embedded derivative component of the convertible bonds  (379)  15   —   (364)
Available-for-sale securities  (3)  —   —   (3)
Others  23   (17)  —   6 
Net deferred tax liabilities  (2,475)  676   44   (1,755)
                 

 Balance as of January 1, 2013  Recognized in consolidated statement of income  Recognized in other comprehensive income  Balance as of December 31, 2013  Balance as of January 1, 2015  Recognized in consolidated statement of income  Recognized in other comprehensive income  Others  Balance as of December 31, 2015 
 RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB 
Current                           
Receivables and inventories  3,292   23   —   3,315   2,883   (1,131)  3  －   1,755 
Accruals  421   (64)  —   357   258   155  －  －   413 
Cash-flow hedges  36   (2)  (120)  (86)
Cash flow hedges  887  －   (637) －   250 
Non-current                                   
Property, plant and equipment  (8,194)  (388)  192   (8,390)  (8,635)  (113)  (383) －   (9,131)
Tax losses carried forward  3,051   (790)  —   2,261   3,474   2,398   11  －   5,883 
Embedded derivative component of the convertible bonds  (364)  (506)  —   (870)  282  －  －   (282) － 
Available-for-sale securities  (3)  —   (433)  (436)  3   1   (4) －  － 
Others  6   7   —   13   7   33  －  －   40 
Net deferred tax liabilities  (1,755)  (1,720)  (361)  (3,836)  (841)  1,343   (1,010)  (282)  (790)
                

 Balance as of January 1, 2014  Recognized in consolidated statement of income  Recognized in other comprehensive income  Others  Balance as of Decembe 31, 2014  Balance as of January 1, 2016  Recognized in consolidated statement of income  Recognized in other comprehensive income  Others  Balance as of December 31, 2016 
 RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB 
Current                              
Receivables and inventories  3,315   (432)  —   —   2,883   1,755   (1,506)  6   92   347 
Accruals  357   (99)  —   —   258   413   (22) －  －   391 
Cash-flow hedges  (86)  —   973   —   887 
Cash flow hedges  250  －   (465) －   (215)
Non-current                                        
Property, plant and equipment  (8,390)  (42)  (21)  (182)  (8,635)  (9,131)  6,063   (392)  109   (3,351)
Tax losses carried forward  2,261   1,213   —   —   3,474   5,883   (3,426)  20  －   2,477 
Embedded derivative component of the convertible bonds  (870)  1,152   —   —   282 
Available-for-sale securities  (436)  6   433   —   3  －   (139)  (7)  146  － 
Others  13   (6)  —   —   7   40   (136) －  －   (96)
Net deferred tax liabilities  (3,836)  1,792   1,385   (182)  (841)  (790)  834   (838)  347   (447)
                    


F-37F-39

22.LEASE PREPAYMENTS

  2015  2016 
  RMB  RMB 
Cost:      
Balance at January 1  59,866   63,324 
Additions  1,835   300 
Transferred from construction in progress  3,125   4,279 
Transferred from other long-term assets  543   994 
Reclassification to other assets  (536)  (229)
Disposals  (1,509)  (422)
Exchange adjustments  —   221 
Balance at December 31  63,324   68,467 
Accumulated amortization:        
Balance at January 1  10,725   12,275 
Amortization charge for the year  1,572   1,840 
Transferred from other long-term assets  111   132 
Reclassification to other assets  (113)  (12)
Written back on disposals  (20)  (83)
Exchange adjustments  —   74 
Balance at December 31  12,275   14,226 
Net book value:  51,049   54,241 
  2013  2014 
  RMB  RMB 
Cost:      
Balance at January 1  43,002   51,417 
Additions  717   904 
Transferred from construction in progress  6,697   4,693 
Transferred from other long-term assets  1,214   4,408 
Reclassification to other assets  (34)  (1,324)
Disposals  (86)  (247)
Exchange adjustments  (93)  10 
Balance at December 31  51,417   59,861 
Accumulated amortization:        
Balance at January 1  6,762   8,147 
Amortization charge for the year  1,288   1,504 
Transferred from other long-term assets  155   1,279 
Reclassification to other assets  (5)  (186)
Written back on disposals  (33)  (22)
Exchange adjustments  (20)  3 
Balance at December 31  8,147   10,725 
Net book value:  43,270   49,136 
         

23.LONG-TERM PREPAYMENTS AND OTHER ASSETS

  
December 31,
 
  2015  2016 
  RMB  RMB 
Operating rights of service stations  26,097   26,896 
Long-term receivables from and prepayment to Sinopec Group Company and fellow subsidiaries  17,759   20,385 
Prepayments for construction projects to third parties  2,989   2,234 
Others (i)  20,946   20,630 
Balance at December 31  67,791   70,145 
  2013  2014 
  RMB  RMB 
Operating rights of service stations      
Cost:      
Balance at January 1  11,851   15,840 
Additions  4,136   17,038 
Decreases  (147)  (130)
Balance at December 31  15,840   32,748 
Accumulated amortization:        
Balance at January 1  1,396   2,213 
Additions  830   4,477 
Decreases  (13)  (17)
Balance at December 31  2,213   6,673 
Net book value at December 31  13,627   26,075 
Other assets        
Long-term receivables from and prepayment to Sinopec Group Company and fellow subsidiaries  11,378   14,935 
Prepayments for construction projects to third parties  4,764   4,944 
Others  17,198   20,261 
Balance at December 31  46,967   66,215 
         

Note:

(i)Others mainly comprise prepaid operating lease charges over one year and catalyst expenditures.

The cost of operating rights of service stations is charged to expense on a straight-line basis over the respective periods of the rights. The movement of operating rights of service stations is as follows:

  2015  2016 
  RMB  RMB 
Operating rights of service stations      
Cost:      
Balance at January 1  32,748   34,407 
Additions  1,720   2,670 
Decreases  (61)  (169)
Balance at December 31  34,407   36,908 
Accumulated amortization:        
Balance at January 1  6,673   8,310 
Additions  1,643   1,777 
Decreases  (6)  (75)
Balance at December 31  8,310   10,012 
Net book value at December 31  26,097   26,896 


F-38F-40

24.SHORT-TERM AND LONG-TERM DEBTS AND LOANS FROM SINOPEC GROUP COMPANY AND FELLOW SUBSIDIARIES

Short-term debts represent:
 December 31, December 31, 
 2013  2014  2015  2016 
 RMB  RMB  RMB  RMB 
Third parties’ debts            
Short-term bank loans  54,640   63,915   31,036   11,944 
RMB denominated  19,983   22,805   11,357   10,931 
US Dollar denominated  34,657   40,685   11,824   1,013 
Euro denominated  —   425   7,855  － 
Current portion of long-term bank loans  1,093   268   5,613   8,795 
RMB denominated  371   163   5,559   8,753 
Japanese Yen denominated  60   54 
US Dollar denominated  662   51   54   42 
Current portion of long-term corporate bonds  3,500   11,000   4,868   29,500 
RMB denominated  3,500   11,000  －   29,500 
Current portion of convertible bonds  40,573   — 
US Dollar denominated  4,868  － 
        
  45,166   11,268   10,481   38,295 
Corporate bonds (i)  10,000   —   30,000   6,000 
  109,806   75,183   71,517   56,239 
Loans from Sinopec Group Company and fellow subsidiaries                
Short-term loans  53,481   102,773   43,693   18,430 
RMB denominated  7,251   9,628   10,806   2,858 
US Dollar denominated  46,225   93,126   32,878   13,577 
Hong Kong Dollar denominated  5   5   5   1,969 
Euro denominated  —   14   4   5 
Singapore Dollar denominated －   21 
Current portion of long-term loans  583   192   236   150 
RMB denominated  555   80   50   150 
US Dollar denominated  28   112   186  － 
  54,064   102,965   43,929   18,580 
  163,870   178,148   115,446   74,819 
        

The Group’s weighted average interest rates on short-term loans were 2.2%1.7% and 1.9%2.42% as of December 31, 20132015 and 20142016, respectively.

, respectively.F-41

Long-term debts comprise:represent:

Interest rate and final maturity December 31, 
   2015  2016 
   RMB  RMB 
Third parties’ debts       
        
Long-term bank loans       
        
Renminbi denominatedInterest rates ranging from 1.08% to 4.41%  per annum as of December 31, 2016 with maturities through 2030  17,345   26,058 
          
US Dollar denominatedInterest rates ranging from to 1.30% to 4.29% per annum as of December 31,  2016 with maturities through 2031  461   426 
    17,806   26,484 
          
  Interest rate and final maturity December 31,
    2013  2014 
    RMB  RMB 
Third parties’ debts        
Long-term bank loans        
Renminbi denominated Interest rates ranging from interest free to 7.4% per annum as of December 31, 2014 with maturities through 2025  7,712   23,001 
Japanese Yen denominated Interest rates at 2.6% per annum as of  December31, 2014 with maturities in 2023  561   445 
US Dollar denominated Interest rates ranging from interest free to 4.29 % per annum as of December 31,  2014 with maturities through 2031  916   1,103 
     9,189   24,549 
           

Corporate bonds(ii)       
        
Renminbi denominated
 
Fixed interest rates ranging from 3.30% to 5.68% per annum as of December 31, 2016 with maturities through 2022  65,500   65,500 
US Dollar denominatedFixed interest rates ranging from 1.25 % to 4.25 % per annum as of December 31, 2016 with maturities through 2043  22,621   18,985 
    88,121   84,485 

        
Total third parties’ long-term debts  105,927   110,969 
          
Less: Current portion   (10,481)  (38,295)
    95,446   72,674 
Long-term loans from Sinopec Group Company and fellow subsidiaries 
          
Renminbi denominatedInterest rates ranging from interest free to 5.75% per annum as of December 31, 2016 with maturities through 2021  44,350   44,922 
US Dollar denominatedNo loans as of December 31, 2016  186  － 
          
Less: Current portion   (236)  (150)
    44,300   44,772 
    139,746   117,446 


F-39


Corporate bonds        
         
Renminbi denominated Fixed interest rates ranging from 3.75% to 5.68% per annum as of December 31, 2014 with maturities through 2022 (ii)  60,000   56,500 
US Dollar denominated Fixed interest rates ranging from 1.25 % to 4.25 % per annum as of December 31, 2014 with maturities through 2043  21,177   21,285 
     81,177   77,785 
           
         
    
  Interest rate and final maturity December 31,
    2013  2014 
    RMB  RMB 
         
Convertible bonds        
Hong Kong Dollar denominated Convertible bonds with maturity in 2014 (iii)  10,948   — 
           
Renminbi denominated Bonds with Warrants with maturity in 2014 (iv)  29,625   — 
  Convertible Bonds with maturity in 2017 (v)  21,461   16,721 
     62,034   16,721 
           
Total third parties’ long-term debts  152,400   119,055 
           
Less: Current portion    (45,166)  (11,268)
     107,234   107,787 

Long-term loans from Sinopec Group Company and fellow subsidiaries 
         
Renminbi denominated Interest rates ranging from interest free to 6.46% per annum as of December 31, 2014 with maturities through 2020  38,911   43,225 
US Dollar denominated Interest rates ranging from 0.74 % to 1.85% per annum as of December 31, 2014 with maturities in 2015  28   112 
Less: Current portion    (583)  (192)
     38,356   43,145 
     145,590   150,932 
           
Short-termShort–term and long-termlong–term bank loans, long-term other loans and loans from Sinopec Group Company and fellow subsidiaries are primarily unsecured.unsecured and carried at amortized cost.

Note:

(i)The Company issued 180-day180–day corporate bonds of face value RMB 10 billion to corporate investors in the PRC debenture market on May 19, 2014September 23, 2015 at par value of RMB 100. The100.The effective yieldcost of the 180-day180–day corporate bonds is 4.40%2.99% per annum. The short-termshort–term bonds were due on November 16, 2014 and were fully paid by the Group at maturity.

The Company issued 270-day corporate bonds of face value RMB 10 billion to corporate investors in the PRC debenture market on August 15, 2013 at par value of RMB 100. The effective yield of the 270-day corporate bonds is 4.49% per annum. The short-term bonds were due on May 13, 2014March 23, 2016 and have been fully paid by the Group at maturity.

The Company issued 182–day corporate bonds of face value RMB 16 billion to corporate investors in the PRC debenture market on December 14, 2015 at par value of RMB 100.The effective cost of the 182–day corporate bonds is 2.90% per annum. The short–term bonds were due on June 14, 2016 and have been fully paid by the Group at maturity.

The Company issued 180–day corporate bonds of face value RMB 4 billion to corporate investors in the PRC debenture market on December 31, 2015 at par value of RMB 100.The effective cost of the 180–day corporate bonds
F-42
is 2.75% per annum. The short-term bonds were due on June 30, 2016 and have been fully paid by the Group at maturity.

The Company issued 182–day corporate bonds of face value RMB 6 billion to corporate investors in the PRC debenture market on September 12, 2016 at par value of RMB 100. The effective cost of the 182–day corporate bonds is 2.54% per annum.

(ii)These corporate bonds are guaranteed by Sinopec Group Company and carried at amortized cost.


F-40
(iii)On April 24, 2007, the Company issued zero coupon convertible bonds due 2014 with an aggregate principal amount of HKD 11,700 (the “2007 Convertible Bonds”). The holders can convert the 2007 Convertible Bonds into shares of the Company from June 4, 2007 onwards at a price of HKD10.76 per share, subject to adjustment for, amongst other things, subdivision or consolidation of shares, bonus issues, rights issues, capital distribution, change of control and other events, which have a dilutive effect on the issued share capital of the Company (“the Conversion Option”). Unless previously redeemed, converted or purchased and cancelled, the 2007 Convertible Bonds will be redeemed on the maturity date at 121.069% of the principal amount. The Company has an early redemption option at any time after April 24, 2011 (subject to certain criteria) (the “Early Redemption Option”) and a cash settlement option when the holders exercise their conversion right (the “Cash Settlement Option”).

During the year ended At December 31, 2011, the Company redeemed part of the 2007 Convertible Bonds upon certain holders’ request, with the principal amount of HKD 39.

As of December 31, 2013, the carrying amount of the liability component and the derivative component, representing the Conversion Option, the Early Redemption Option was2016, RMB 10,948. No conversion of the 2007 Convertible Bonds has occurred up to December 31, 2013.
The 2007 Convertible Bonds were due on April 24, 2014 and have been fully paid by the Group at maturity.

The changes in the fair value of the derivative component from December 31, 2012 to December 31, 2013 and from December 31, 2013 to April 24, 2014 resulted in an unrealized gain of RMB 114 and a realized loss of RMB1, respectively, which has been recorded under “finance costs” in the consolidated statement of income.

The initial carrying amount of the liability component of the 2007 Convertible Bonds is the residual amount, which is after deducting the allocated issuance cost of the 2007 Convertible Bonds relating to the liability component and the fair value of the derivative component as of April 24, 2007. Interest expense is calculated using the effective interest method by applying the effective interest rate of 4.19% to the adjusted liability component.

(iv)On February 26, 2008, the Company issued bonds with stock warrants due 2014 with an aggregate principal amount of RMB 30,000 in the PRC (the “Bonds with Warrants”). The Bonds with Warrants, which bear a fixed interest rate of 0.80% per annum payable annually, were issued at par value of RMB 100. The Bonds with Warrants18,985 (USD denominated corporate bonds) are guaranteed by Sinopec Group Company.

The initial recognition of the liability component of the Bond with Warrants is measured at the present value of the future interest and principal payments, discounted at the market rate of interest applicable at the time of initial recognition to similar liabilities that do not have a conversion option. Interest expense is calculated using the effective interest method by applying the market interest rate of 5.40% to the liability component. On March 4, 2010, warrants of the bonds have already expired.

The Bonds with Warrants were due on February 20, 2014 and have been fully paid by the Group at maturity.

(v)On March 1, 2011, the Company issued convertible bonds due 2017 with an aggregate principal amount of RMB 23,000 in the PRC (the “2011 Convertible Bonds”). The 2011 Convertible Bonds were issued at par value of RMB 100 and bear a fixed interest rate of 0.5% per annum for the first year, 0.7% for the second year, 1.0% for the third year, 1.3% for the fourth year, 1.8% for the fifth year and 2.0% for the sixth year, payable annually. The holders can convert the 2011 Convertible Bonds into shares of the Company from August 24, 2011 onwards at an initial conversion price of RMB 9.73 per share, subject to adjustment for, amongst other things, cash dividends, subdivision or consolidation of shares, bonus issues, issue of new shares, rights issues, capital distribution, change of control and other events which have an effect on the issued share capital of the Company (“the Conversion Option”). Unless previously redeemed, converted or purchased and cancelled, the 2011 Convertible Bonds will be redeemed within 5 trading days after maturity at 107% of the principal amount, including interest for the sixth year. The initial carrying amounts of the liability component and the derivative component, representing the Conversion Option of the 2011 Convertible Bonds, were RMB 19,279 and RMB 3,610, respectively.


F-41

During the term of the 2011 Convertible Bonds, the conversion price may be subject to downward adjustment that if the closing prices of the Company’s A Shares in any fifteen trading days out of any thirty consecutive trading days are lower than 80% of the prevailing conversion price, the board of directors may propose downward adjustment to the conversion price subject to the shareholders’ approval. The adjusted conversion price shall be not less than (a) the average trading price of the Company’s A Shares for the twenty trading days prior to the shareholders’ approval, (b) the average trading price of the Company’s A Shares on the day immediately before the shareholders’ approval, (c) the net asset value per share based on the latest audited financial statements prepared under ASBE, and (d) the nominal value per share.

During the term of the 2011 Convertible Bonds, if the closing price of the A Shares of the Company is not lower than 130% of the conversion price in at least 15 trading days out of any 30 consecutive trading days, the Company has the right to redeem all or part of the 2011 Convertible Bonds based on the nominal value plus the accrued interest ("the terms of conditional redemption").

As of December 31, 2014, the carrying amount of the liability component and the derivative component were RMB 13,433 and RMB 3,288, respectively.

As of December 31, 2013, the carrying amount of the liability component and the derivative component, were RMB 20,913 and RMB 548 respectively.

During the year ended December 31, 2014, the conversion price of the 2011 Convertible Bonds was adjusted to RMB 4.89 per share as a result of cash dividends, bonus issues and capitalization.

During the year ended December 31, 2011, RMB 328 thousand of the 2011 Convertible Bonds were converted into 34,662 A shares of the Company.

During the year ended December 31, 2012, RMB 857,033 thousand of the 2011 Convertible Bonds were converted into 117,724,450 A shares of the Company.

During the year ended December 31, 2013, RMB 725 thousand of the 2011 Convertible Bonds were converted into 114,076 A shares of the Company.

During the year ended December 31, 2014, RMB 8,442 of the 2011 Convertible Bonds were converted into 1,715,081,853 A shares of the Company.

As of December 31, 2013 and 2014, the fair value of the derivative component of the 2011 Convertible Bonds was calculated using the Binomial Model. The followings are the major inputs used in the Binomial Model:

 2013 2014
    
Stock price of A sharesRMB 4.48 RMB 6.49
Conversion priceRMB 5.13 RMB 4.89
Credit spread95 basis points 133 basis points
RMB onshore swap rate5.23% 3.40%

Any change in the major inputs into the Binomial Model will result in changes in the fair value of the derivative component. The changes in the fair value of the derivative component from December 31, 2012 to December 31, 2013 resulted in an unrealized gain of RMB 1,914, and from December 31, 2013 to December 31, 2014 resulted in a realized loss of RMB 1,613 and an unrealized loss of RMB 2,997, respectively, which have been recorded in the “finance costs” section of the consolidated statement of income.

The initial carrying amount of the liability component of the 2011 Convertible Bonds is the residual amount, after deducting the allocated issuance cost of the 2011 Convertible Bonds relating to the liability component and the fair value of the derivative component as of March 1, 2011. Interest expense is calculated using the effective interest method by applying the effective interest rate of 5.10% to the adjusted liability component.


F-42

As of January 26, 2015, the terms of conditional redemption of 2011 Convertible Bonds of the Company have been triggered for the first time. At the 22nd meeting of the fifth session of the board of the Company (the “Board”), the Board has reviewed and approved the proposal for the redemption of 2011 Convertible Bonds, and decided to exercise the right of redemption and to redeem all of the outstanding 2011 Convertible Bonds registered on February 11, 2015.

From January 1, 2015 to February 11, 2015, the 2011 Convertible Bonds with a total value of RMB 13,647 were converted into 2,790,814,006 A shares of the Company. As of  February 11, 2015, the total share capital of the Company has been increased to 121,071,209,646 shares. The unconverted convertible bonds amounted to RMB 52.78 (527,760 convertible bonds).

As of February 17, 2015, the Company has redeemed and fully paid the unconverted portion at RMB 101.261 per convertible bond (including the accrued interest and interest tax accrued thereon).

2525.TRADE ACCOUNTS AND BILLS PAYABLE

  December 31, 
  2015  2016 
  RMB  RMB 
       
Amounts due to third parties  117,342   154,882 
Amounts due to Sinopec Group Company and fellow subsidiaries  10,348   13,168 
Amounts due to associates and joint ventures  2,868   6,251 
   130,558   174,301 
Bills payable  3,566   5,828 
Trade accounts and bills payable measured at amortized cost  134,124   180,129 
  December 31,
  2013  2014 
  RMB  RMB 
Amounts due to third parties  192,082   181,519 
Amounts due to Sinopec Group Company and fellow subsidiaries  8,114   13,575 
Amounts due to associates and joint ventures  2,528   3,272 
   202,724   198,366 
Bills payable  4,526   4,577 
Trade accounts and bills payable measured at amortized cost  207,250   202,943 
         

26.ACCRUED EXPENSES AND OTHER PAYABLES

  December 31, 
  2015  2016 
  RMB  RMB 
       
Salaries and welfare payable  1,185   1,618 
Interest payable  1,457   1,396 
Payables for constructions  58,778   52,827 
Other payables  23,912   21,468 
Financial liabilities carried at amortized costs  85,332   77,309 
Taxes other than income tax  31,444   46,835 
Receipts in advance  92,688   95,928 
Derivative financial instruments  2,750   4,472 
   212,214   224,544 
  December 31,
  2013  2014 
  RMB  RMB 
Salaries and welfare payable  818   839 
Interest payable  2,290   1,695 
Other payables  78,003   83,047 
Financial liabilities carried at amortized costs  81,111   85,581 
Taxes other than income tax  32,792   27,586 
Receipts in advance  81,079   89,918 
Derivative financial instruments  2,624   18,990 
   197,606   222,075 
         

27.PROVISIONS

Provisions primarily represent provision for future dismantlement costs of oil and gas properties. The Group has mainly committed to the localPRC government to establish certain standardized measures for the dismantlement of its oil and gas properties by making reference to the industry practices and is thereforethereafter constructively obligated to take dismantlement measures of its oil and gas properties.

Movement of provision of the Group’s obligations for the dismantlement of its oil and gas properties is as follows:

  2014  2015  2016 
  RMB  RMB  RMB 
          
Balance as of January 1  26,004   29,613   33,115 
Provision for the year  3,309   2,899   3,420 
Accretion expenses  1,008   1,081   1,057 
Utilized  (714)  (599)  (843)
Exchange adjustments  6   121   169 
Balance as of December 31  29,613   33,115   36,918 
  2012  2013  2014 
  RMB  RMB  RMB 
Balance as of January 1  18,317   21,525   26,004 
Provision for the year  2,833   4,188   3,309 
Accretion expenses  856   877   1,008 
Utilized  (480)  (561)  (714)
Exchange adjustments  (1)  (25)  6 
Balance as of December 31  21,525   26,004   29,613 
             


F-43

28.SHARE CAPITAL

  December 31, 
  2015  2016 
  RMB  RMB 
Registered, issued and fully paid      
95,557,771,046 listed A shares (2015: 95,557,771,046) of RMB 1.00 each  95,558   95,558 
25,513,438,600 listed H shares (2015: 25,513,438,600) of RMB 1.00 each  25,513   25,513 
   121,071   121,071 
  December 31,
  2013  2014 
  RMB  RMB 
Registered, issued and fully paid      
92,766,957,040 listed A shares (2013: 91,051,875,187) of RMB 1.00 each  91,052   92,767 
25,513,438,600 listed H shares (2013: 25,513,438,600) of RMB 1.00 each  25,513   25,513 
   116,565   118,280 
         

The Company was established on February 25, 2000 with a registered capital of 68.868.8 billion domestic state-owned shares with a par value of RMB 1.00 each. Such shares were issued to Sinopec Group Company in consideration for the assets and liabilities of the Predecessor Operations transferred to the Company (Note 1).

Pursuant to the resolutions passed at an Extraordinary General Meeting held on July 25, 2000 and approvals from relevant government authorities, the Company is authorized to increase its share capital to a maximum of 88.3 billion shares with a par value of RMB 1.00 each and offer not more than 19.5 billion shares with a par value of RMB 1.00 each to investors outside the PRC. Sinopec Group Company is authorized to offer not more than 3.5 billion shares of its shareholdings in the Company to investors outside the PRC. The shares sold by Sinopec Group Company to investors outside the PRC would be converted into H shares.

In October 2000, the Company issued 15,102,439,00015,102,439,000 H shares with a par value of RMB 1.00 each, representing 12,521,864,000 H shares and 25,805,750 American Depositary Shares (“ADSs”, each representing 100 H shares), at prices of HK$HKD 1.59 per H share and US$USD 20.645 per ADS, respectively, by way of a global initial public offering to Hong Kong and overseas investors. As part of the global initial public offering, 1,678,049,000 domestic state-owned ordinary shares of RMB 1.00 each owned by Sinopec Group Company were converted into H shares and sold to Hong Kong and overseas investors.

In July 2001, the Company issued 2.8 billion listed A shares with a par value of RMB 1.00 each at RMB 4.22 by way of a public offering to natural persons and institutional investors in the PRC.

During the year ended December 31, 2010, the Company issued 88,774 listed A shares with a par value of RMB 1.00 each, as a result of exercise of 188,292 warrants entitled to the Bonds with Warrants.

During the year ended December 31, 2011, the Company issued 34,662 listed A shares with a par value of RMB 1.00 each, as a result of conversion by the holders of the 2011 Convertible Bonds.

During the year ended December 31, 2012, the Company issued 117,724,450 listed A shares with a par value of RMB 1.00 each, as a result of conversion by the holders of the 2011 Convertible Bonds.

During the year ended December 31, 2013, the Company issued 114,076 listed A shares with a par value of RMB 1.00 each, as a result of conversion by the holders of the 2011 Convertible Bonds. (Note 24(v)).

On February 14, 2013, the Company issued 2,845,234,000 listed H shares (“the Placing”) with a par value of RMB 1.00 each at the Placing Price of HK$HKD 8.45 per share. The aggregate gross proceeds from the Placing amounted to approximately HK$HKD 24,042,227,300 and the aggregate net proceeds (after deduction of the commissions and estimated expenses) amounted to approximately HK$HKD 23,970,100,618.

In June 2013, the Company issued 21,011,962,225 listed A shares and 5,887,716,600 listed H shares as a result of bonus issues of 2 shares converted from the retained earnings pursuant to the shareholders’ approval at the Annual General Meeting on May 29, 2013, and 1 share transferred from the share premium for every 10 existing shares.

During the year ended December 31, 2013, the Company issued 114,076 listed A shares with a par value of RMB 1.00 each, as a result of conversion by the holders of the 2011 Convertible Bonds (Note 38(g)).

During the year ended December 31, 2014, the Company issued 1,715,081,853 listed A shares with a par value of RMB 1.00 each, as a result of conversion by the holders of the 2011 Convertible Bonds.Bonds (Note 38(g)).

During the year ended December 31, 2015, the Company issued 2,790,814,006 listed A shares with a par value of RMB 1.00 each, as a result of conversion by the holders of the 2011 Convertible Bonds (Note 38(g)).

All A shares and H shares rank pari passu in all material aspectsaspects.

.F-44

Capital management

Management optimizes the structure of the Group’s capital, which comprises of equity and loans.debts. In order to maintain or adjust the capital structure of the Group, management may cause the Group to issue new shares, adjust the capital expenditure plan, sell assets to reduce debt, or adjust the proportion of short-term and long-

F-44

termlong-term loans. Management monitors capital on the basis of debt-to-capital ratio, which is calculated by dividing long-term loans (excluding current portion,portion), including long-term debts and loans from Sinopec Group Company and fellow subsidiaries),subsidiaries, by the total equity attributable to owners of the Company and long-term loans (excluding current portion), and liability-to-asset ratio, which is calculated by dividing total liabilities by total assets. Management’s strategy is to make appropriate adjustments according to the Group’s operating and investment needs and the changes of market conditions, and to maintain the debt-to-capital ratio and the liability-to-asset ratio of the Group at a range considered reasonable.reasonable. The debt-to-capital ratio of the Group was 20.4%17.1% and 20.3%14.2% as of December 31, 20132015 and 2014, respectively.2016, respectively. The liability-to-asset ratio of the Group was 55.1%45.5% and 55.5%44.5% as of December 31, 20132015 and 2014, respectively.2016, respectively.

The schedules of the contractual maturities of loans and commitments are disclosed in Notes 24 and 30,29, respectively.

There were no changes in the management’s approach to capital management of the Group during the year. Neither the Company nor any of its subsidiaries areis subject to externally imposed capital requirements.


F-45

29.RESERVES

  2013  2014 
  RMB  RMB 
Capital reserve (Note (a))      
Balance as of January 1  (33,307)  (33,713)
Contribution to subsidiaries from non-controlling interests  600   — 
Non-tradable shares reform  (986)  — 
Acquisitions of non-controlling interests of subsidiaries  (20)  — 
Transaction with non-controlling interests (Note 34 (iii))  —   3,216 
Balance as of December 31  (33,713)  (30,497)
         
Share premium (Note (b))        
Balance as of January 1  25,752   33,347 
Conversion of the 2011 Convertible Bonds (Note 24(v))  1   8,477 
Rights issue of Hshares, net of issuance costs(Note28)  16,561   — 
Capitalization(Note28)  (8,967)  — 
Balance as of December 31  33,347   41,824 
         
Statutory surplus reserve (Note (c))        
Balance as of January 1  67,603   73,337 
Appropriation  5,734   3,215 
Balance as of December 31  73,337   76,552 
         
Discretionary surplus reserve        
Balance as of January 1  117,000   117,000 
Appropriation  —   — 
Balance as of December 31  117,000   117,000 
         
Other reserves        
Balance as of January 1  3,305   2,491 
Other comprehensive income  1,180   (7,668)
Others (Note (g))  (1,994)  (1,002)
Balance as of December 31  2,491   (6,179)
         
Retained earnings (Note (d))        
Balance as of January 1  243,741   259,776 
Net income attributable to owners of the Company  66,132   46,466 
Final dividend inspect of the previous year, approved and paid during the year (Note (e))  (17,933)  (17,519)
Interim dividend (Note (f))  (10,491)  (10,512)
Appropriation  (5,734)  (3,215)
Bonus issues(Note 28)  (17,933)  — 
Others (Note (g))  1,994   1,065 
Balance as of December 31  259,776   276,061 
   452,238   474,761 
         
Note:

(a)The capital reserve represents (i) the difference between the total amount of the par value of shares issued and the amount of the net assets transferred from Sinopec Group Company in connection with the Reorganization, and (ii) the difference between the consideration paid over the amount of the net assets of entities and related operations acquired from Sinopec Group Company and non-controlling interests.

(b)The application of the share premium account is governed by Sections 167 and 168 of the PRC Company Law.

(c)
According to the Company’s Articles of Association, the Company is required to transfer 10% of its net income in accordance with the PRC accounting policies complying with Accounting Standards for Business Enterprises (“ASBE”), adopted by the Group to statutory surplus reserve. In the event that the reserve balance reaches 50% of the registered capital, no transfer is needed. The transfer to this reserve must be made before distribution of a dividend to shareholders. Statutory surplus reserve can be used to make good previous years’ losses, if any, and may be converted into share capital by the issue of new shares to shareholders in proportion to their existing shareholdings or by increasing the par value of the shares currently held by them, provided that the balance after such issue is not less than 25% of the registered capital.

F-46

During the years ended December 31, 2012, 2013 and 2014, the Company transferred RMB 6,340, RMB 5,734 and RMB 3,215, respectively, being 10% of the net income determined in accordance with the PRC accounting policies complying with ASBE, to this reserve.

(d)According to the Company’s Articles of Association, the amount of retained earnings available for distribution to owners of the Company is the lower of the amount determined in accordance with the accounting policies complying with ASBE and the amount determined in accordance with the accounting policies complying with IFRS. As of December 31, 2013 and 2014, the amount of retained earnings available for distribution was RMB 164,698 and RMB 166,481, respectively, being the amount determined in accordance with the accounting policies complying with IFRS.

Pursuant to a resolution passed at the director’s meeting on March 20, 2015, final dividends in respect of the year ended December 31, 2014 of RMB 0.11 per share totaling RMB 13,318 were proposed for shareholders’ approval at the Annual General Meeting. Final cash dividend for the year ended December 31, 2014 proposed after the balance sheet date has not been recognized as a liability at the balance sheet date.

(e)Pursuant to the shareholders’ approval at the Annual General Meeting on May 29, 2013, a final dividend of RMB 0.20 per share totaling RMB 17,933, and with bonus issues of 2 shares converted from the retained earnings and 1 share transferred from the share premium for every 10 existing shares in respect of the year ended December 31, 2012 was declared and cash dividends were paid on June 25, 2013.

Pursuant to the shareholders’ approval at the Annual General Meeting on May 9, 2014, a final dividend of RMB 0.15 per share totaling RMB 17,519 in respect of the year ended December 31, 2013 was declared and paid on June 19, 2014.

(f)Pursuant to the Company’s Articles of Association and a resolution passed at the Directors’ meeting on August 23, 2013, the directors authorized to declare an interim dividend for the year ended December 31, 2013 of RMB 0.09 per share totaling RMB 10,491.

Pursuant to the Company’s Articles of Association and a resolution passed at the Directors’ meeting on August 22, 2014, the directors authorized to declare an interim dividend for the year ended December 31, 2014 of RMB 0.09 per share totaling RMB 10,512.

(g)According to relevant PRC regulations, the Group is required to transfer an amount to other reserves for the safety production fund based on the turnover of certain refining and chemicals products or based on the production volume of crude oil and natural gas. During the year ended December 31, 2012, the Group transferred RMB 435 from retained earnings to other reserves for the safety production fund, and transferred RMB 1,994 and RMB 1,065 from other reserves to retained earnings during the year ended December 31, 2013 and 2014 for the safety production fund.

30.COMMITMENTS AND CONTINGENT LIABILITIES

Operating lease commitments

The Group leases land and buildings, service stations and other equipment through non-cancellable operating leases. These operating leases do not contain provisions for contingent lease rentals. None of the rental agreements contain escalation provisions that may require higher future rental payments.


F-47

As of December 31, 2013 and 2014,2015and 2016, the future minimum lease payments under operating leases are as follows:

  December 31, 
  2015  2016 
  RMB  RMB 
       
Within one year  13,737   14,917 
Between one and two years  13,265   14,228 
Between two and three years  13,199   13,966 
Between three and four years  13,091   13,217 
Between four and five years  12,430   12,980 
Thereafter  284,300   275,570 
   350,022   344,878 
  December 31, 
  2013  2014 
  RMB  RMB 
Within one year  13,507   13,909 
Between one and two years  13,064   13,480 
Between two and three years  12,850   13,113 
Between three and four years  12,742   12,984 
Between four and five years  12,656   13,063 
Thereafter  307,268   297,425 
   372,087   363,974 
         

Capital commitments

As of December 31, 20132015 and 2014,2016, capital commitments are as follows:

  December 31, 
  2015  2016 
  RMB  RMB 
       
Authorized and contracted for (i)  113,017   116,379 
Authorized but not contracted for  47,043   31,720 
   160,060   148,099 
  December 31, 
  2013  2014 
  RMB  RMB 
Authorized and contracted for (i)  181,428   138,795 
Authorized but not contracted for  111,169   102,386 
   292,597   241,181 
         

These capital commitments relate to oil and gas exploration and development, refining and petrochemical production capacity expansion projects, the construction of service stations and oil depots and investment commitmentscommitments.

.F-45

Note：
Note:

(i)The investment commitments for the year ended December 31, 20132015 and 20142016 of the Group were RMB 4,9934,089 and RMB 4,030,4,173, respectively.

Commitments to joint ventures

Pursuant to certain of the joint venture agreements entered into by the Group, the Group is obliged to purchase products from the joint ventures atbased on market prices.

Exploration and production licenses

Exploration licenses for exploration activities in the PRC are registered with the Ministry of Land and Resources. The maximum term of the Group’s exploration licenses is 7 years, and may be renewed twice within 30 days prior to expiration of the original term with each renewal being for a two-year term. The Group is obligated to make progressive annual exploration investment relating to the exploration blocks in respect of which the license is issued. The Ministry of Land and Resources also issues production licenses to the Group on the basis of the reserve reports approved by relevant authorities. The maximum term of a full production license is 30 years unless a special dispensation is given by the State Council. The maximum term of production licenses issued to the Group is 80 years as a special dispensation was given to the Group by the State Council. The Group’s production license is renewable upon application by the Group 30 days prior to expiration.

The Group is required to make payments of exploration license fees and production right usage fees to the Ministry of Land and Resources annually which are expensed. Payments incurred were approximately RMB 424,408, RMB 404372 and RMB 408333 for the years ended December 31, 2012, 20132014, 2015 and 2014,2016, respectively.

F-48
Estimated future annual payments are as follows:

  December 31, 
  2015  2016 
  RMB  RMB 
       
Within one year  283   263 
Between one and two years  125   123 
Between two and three years  32   25 
Between three and four years  22   24 
Between four and five years  21   25 
Thereafter  834   867 
   1,317   1,327 
  December 31, 
  2013  2014 
  RMB  RMB 
Within one year  318   312 
Between one and two years  140   160 
Between two and three years  38   32 
Between three and four years  24   22 
Between four and five years  19   19 
Thereafter  835   811 
   1,374   1,356 
         

Contingent liabilities

As of December 31, 20132015 and 2014,2016, guarantees by the group in respect of facilities granted to the parties below wereare as follows:

  December 31, 
  2015  2016 
  RMB  RMB 
       
Joint ventures  703   658 
Associates (ii) －   11,545 
Others  6,010   10,669 
   6,713   22,872 
  December 31, 
  2013  2014 
  RMB  RMB 
Joint ventures  438   168 
Others  5,425   5,552 
   5,863   5,720 
         

Management monitors the conditions that are subject to the guarantees to identify whether it is probable that a loss has occurred, and recognizes any such losses under guarantees when those losses are estimable. As of December 31,, 2013 2015 and 2014,2016, it iswas not probable that the Group will be required to make payments under the guarantees. Thus no liability has been accrued for a loss related to the Group’s obligation under these guarantee arrangements.


F-46
Note:

(ii)The Group provided a guarantee in respect to standby credit facilities granted to Zhongtian Synergetic Energy by banks amount to RMB 17,050. As at December 31, 2016, the amount withdrawn by Zhongtian Synergetic Energy and guaranteed by the Group was RMB 11,545.

Environmental contingencies

Under existing legislation, management believes that there are no probable liabilities that will have a material adverse effect on the financial position or operating results of the Group. The PRC government, however, has moved, and may move further towards more rigorous enforcement of applicable laws, and towards the adoption of more stringent environmental standards. Environmental liabilities are subject to considerable uncertainties which affect management’s ability to estimate the ultimate cost of remediation efforts. These uncertainties include i) the exact nature and extent of the contamination at various sites including, but not limited to refineries, oil fields, service stations, terminals and land development areas, whether operating, closed or sold, ii) the extent of required cleanup efforts, iii) varying costs of alternative remediation strategies, iv) changes in environmental remediation requirements, and v) the identification of new remediation sites. The amount of such future cost is indeterminable due to such factors as the unknown magnitude of possible contamination and the unknown timing and extent of the corrective actions that may be required. Accordingly, the outcome of environmental liabilities under proposed or future environmental legislation cannot reasonably be estimated at present, and could be material. The Group paid normal routine pollutant discharge fees of approximately RMB 4,813,5,352, RMB 5,1545,813 and RMB 5,3526,358 in the consolidated financial statements for the years ended December 31, 2012, 20132014, 2015 and 2014,2016, respectively.

Legal contingencies

The Group is a defendant in certain lawsuits as well as the named party in other proceedings arising in the ordinary course of business. Management has assessed the likelihood of an unfavourable outcome of such contingencies, lawsuits or other proceedings and believes that any resulting liabilities will not have a material adverse effect on the financial position, operating results or cash flows of the Group.


F-49F-47
31.30.RELATED PARTY TRANSACTIONS

Parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control or jointly control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to control or common control. Related parties may be individuals (being members of key management personnel, significant shareholders and /and/ or their close family members) or other entities and include entities which are under the significant influence of related parties of the Group where those parties are individuals, and post-employment benefit plans which are for the benefit of employees of the Group or of any entity that is a related party of the Group.

(a)(a)          Transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures

The Group is part of a larger group of companies under Sinopec Group Company, which is controlled by the PRC government, and has significant transactions and relationships with Sinopec Group Company and fellow subsidiaries. Because of these relationships, it is possible that the terms of these transactions are not the same as those that would result from transactions among wholly unrelated parties.

The principal related party transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures, which were carried out in the ordinary course of business.business are as follows:

   
 
Years ended December 31,
     
Years ended December 31,
 
 Note 2012  2013  2014  Note  2014  2015  2016 
   RMB  RMB  RMB     RMB  RMB  RMB 
Sales of goods (i)  313,919   318,092   305,044  (i)   303,972   211,197   194,179 
Purchases (ii)  129,005   141,316   134,424  (ii)   133,990   92,627   118,242 
Transportation and storage (iii)  1,590   1,639   1,606  (iii)   1,606   1,299   1,333 
Exploration and development services (iv)  48,831   52,814   49,399  (iv)   49,399   37,444   27,201 
Production related services (v)  11,893   13,235   10,306  (v)   10,290   10,880   10,816 
Ancillary and social services (vi)  4,062   6,755   6,753  (vi)   6,753   6,754   6,584 
Operating lease charges (vii)  7,408   11,116   11,302 
Operating lease charges for land (vii)   10,531   10,618   10,474 
Operating lease charges for buildings (vii)   497   462   449 
Other operating lease charges (vii)   274   302   456 
Agency commission income (viii)  154   185   132  (viii)   132   116   129 
Interest income (ix)  116   89   135  (ix)   135   207   209 
Interest expense (x)  1,228   1,802   1,421  (x)   1,421   1,194   996 
Net deposits withdrawn from / (placed with) related parties (ix)  3,108   (2,528)  2,319 
Net loans obtained from related parties (xi)  30,805   11,903   53,690 
Net deposits withdrawn from/(placed with) related parties (ix)   2,319   (14,082)  (21,770)
Net loans obtained from/(repaid to) related parties (xi)   53,690   (57,881)  (24,877)

The amounts set out in the table above in respect of each of the years in the three-year period ended December 31, 20142016 represent the relevant costs and income as determined by the corresponding contracts with the related parties.

There werewas no guaranteesguarantee given to banks by the Group in respect of banking facilities to related parties as of December 31, 20132015 and 2014,2016, except for the guarantees disclosed in Note 30.29.

The directors of the Company are of the opinion that the above transactions with related parties were conducted in the ordinary course of business and on normal commercial terms or in accordance with the agreements governing such transactions, and this has been confirmed by the independent non-executive directors.

Notes:

(i)Sales of goods represent the sale of crude oil, intermediate petrochemical products, petroleum products and ancillary materials.

(ii)Purchases represent the purchase of materials and utility supplies directly related to the Group’s operations such as the procurement of raw and ancillary materials and related services, supply of water, electricity and gas.

(iii)Transportation and storage represent the cost for the use of railway, road and marine transportation services, pipelines, loading, unloading and storage facilities.



F-50F-48
 
(iv)Exploration and development services comprise direct costs incurred in the exploration and development such as geophysical, drilling, well testing and well measurement services.

(v)Production related services represent ancillary services rendered in relation to the Group’s operations such as equipment repair and general maintenance, insurance premium, technical research, communications, fire fighting,firefighting, security, product quality testing and analysis, information technology, design and engineering, construction of oilfield ground facilities, refineries and chemical plants, manufacture of replacement parts and machinery, installation, project management and environmental protection.

(vi)Ancillary and social services represent expenditures for social welfare and support services such as educational facilities, media communication services, sanitation, accommodation, canteens, property maintenance and management services.

(vii)Operating lease charges represent the rental paid to Sinopec Group Company for operating leases in respect of land, buildings and equipment.

(viii)Agency commission income represents commission earned for acting as an agent in respect of sales of products and purchase of materials for certain entities owned by Sinopec Group Company.

(ix)
Interest income represents interest received from deposits placed with Sinopec Finance Company Limited and Sinopec Century Bright Capital Investment Limited, finance companies controlled by Sinopec Group Company. The applicable interest rate is determined in accordance with the prevailing saving deposit rate. The balance of deposits as of December 31, 20132015 and 20142016 were RMB 6,54018,303 and RMB 4,221,40,073, respectively.

(x)Interest expense represents interest charges on the loans and advances obtained from Sinopec Group Company and fellow subsidiaries.

(xi)The Group obtained or repaid loans from or to Sinopec Group Company and fellow subsidiaries.

In connection with the Reorganization, the Company and Sinopec Group Company entered into a number of agreements under which 1) Sinopec Group Company will provide goods and products and a range of ancillary, social and supporting services to the Group and 2) the Group will sell certain goods to Sinopec Group Company. These agreements impacted the operating results of the Group for the year ended December 31, 2014.2016. The terms of these agreements are summarized as follows:

●·The Company has entered into a non-exclusive Agreement“Agreement for Mutual Provision of Products and Ancillary ServicesServices” (“Mutual Provision Agreement”) with Sinopec Group Company effective from January 1, 2000 in which Sinopec Group Company has agreed to provide the Group with certain ancillary production services, construction services, information advisory services, supply services and other services and products. While each of Sinopec Group Company and the Company is permitted to terminate the Mutual Provision Agreement upon giving at least six months notice, Sinopec Group Company has agreed not to terminate the agreement if the Group is unable to obtain comparable services from a third party. The pricing policy for these services and products provided by Sinopec Group Company to the Group is as follows:

(1)the government-prescribed price;

(2)where there is no government-prescribed price, the government-guidance price;

(3)where there is neither a government-prescribed price nor a government-guidance price, the market price; or

(4)where none of the above is applicable, the price to be agreed between the parties, which shall be based on a reasonable cost incurred in providing such services plus a profit margin not exceeding 6%.

●·The Company has entered into a non-exclusive Agreement“Agreement for Provision of Cultural and Educational, Health Care and Community ServicesServices” with Sinopec Group Company effective from January 1, 2000 in which Sinopec Group Company has agreed to provide the Group with certain cultural, educational, health care and community services on the same pricing terms and termination conditions as described in the above Mutual Provision Agreement.

F-49
●
·
The Company has entered into a series of lease agreements with Sinopec Group Company to lease certain lands and buildings effective on January 1, 2000. The lease term is 40 or 50 years for lands and 20 years for buildings, respectively. The Company and Sinopec Group Company can renegotiate the rental amount every three years for land. The Company and Sinopec Group Company can renegotiate the rental amount for buildings every year. However such amount cannot exceed the market price as determined by an independent third party.

F-51
●·The Company has entered into agreements with Sinopec Group Company effective from January 1, 2000 under which the Group has been granted the right to use certain trademarks, patents, technology and computer software developed by Sinopec Group Company.

●·The Company has entered into a service stations franchise agreement with Sinopec Group Company effective from January 1, 2000 under which its service stations and retail stores would exclusively sell the refined products supplied by the Group.

·Pursuant to the Equity Transfer Agreement relating to the Transfer of 100% Equity Interest of Sinopec Beijing Jingtian Engineering and Construction Co., Ltd. (Jingtian Co.) entered into by the Company and Sinopec Baichuan Economic and Trading Company (Baichuan Co.) on August 26, 2015, the Company transferred 100% equity interest of Jingtian Co. to Baichuan Co. in December 2015, which was directly and wholly owned by Sinopec Group Company. The preliminary consideration of this transaction was RMB 1,869, which was based on the fair value of Jingtian Co.'s net assets as of March 31, 2015, adjusted by the subsequent changes to Jingtian Co.'s net assets between March 31, 2015 and December 31, 2015 according to the audited financial statements of Jingtian Co. as of each date.

●·Pursuant to the resolutions passed at the Directors’ meeting held on October 31, 2014, the Group acquired the equity interests of YASREF from Sinopec Group Company. The acquisition has been completed in 2014 (Note 19).

●·Pursuant to the Share Repurchase Agreement and Disposal Agreement by the Company and Sinopec Yizheng Chemical Fibre Company Limited (Yizheng Chemical Fibre Co., Ltd.) on September 12, 2014, Yizheng Chemical Fibre Co., Ltd repurchased and cancelled the 40.25% of its equity interests held by the Company in exchange for the transfer of its outgoing business to the Company and issued shares to Sinopec Group Company for the acquisition of 100% equity Interest of Sinopec Oilfield Service Corporation (a wholly-owned subsidiary of the Sinopec Group Company). These transactions were completed in December 2014 (Note 34).

●Pursuant to the resolutions passed at the Directors’ meeting held on March 22, 2013, the Group acquired the equity interests of CIR, Taihu and Mansarovar from Sinopec Group Company. The acquisition was completed in 2013 (Note 19).2014.

Amounts due from / from/to Sinopec Group Company and fellow subsidiaries, associates and joint ventures included in the following accounts captions are summarized as follows:

  December 31, 
  2015  2016 
  RMB  RMB 
Trade accounts receivable  22,393   10,978 
Prepaid expenses and other current assets  9,084   13,430 
Long-term prepayments and other assets  17,760   20,385 
Total  49,237   44,793 
         
Trade accounts payable  13,195   19,419 
Accrued expenses and other payables  20,457   21,590 
Other long-term liabilities  8,226   9,998 
Short-term loans and current portion of long-term loans from Sinopec Group Company and fellow subsidiaries  43,929   18,580 
Long-term loans excluding current portion from Sinopec Group Company and fellow subsidiaries  44,300   44,772 
Total  130,107   114,359 
  December 31, 
  2013  2014 
  RMB  RMB 
Trade accounts receivable  18,402   25,478 
Prepaid expenses and other current assets  2,276   3,564 
Long-term prepayment and other assets  11,378   14,935 
Total  32,056   43,977 
         
Trade accounts payable  10,642   16,847 
Accrued expenses and other payables  22,369   24,711 
Other long-term liabilities  4,102   6,470 
Short-term loans and current portion of long-term loans from Sinopec Group Company and fellow subsidiaries  54,064   102,965 
Long-term loans excluding current portion from Sinopec Group Company and fellow subsidiaries  38,356   43,145 
Total  129,533   194,138 
         


F-50
Amounts due from / from/to Sinopec Group Company and fellow subsidiaries, associates and joint ventures, other than short-term loans and long-term loans, bear no interest, are unsecured and are repayable in accordance with normal commercial terms. The terms and conditions associated with short-term loans and long-term loans payable to Sinopec Group Company and fellow subsidiaries are set out in Note 24.24.

The long-term borrowings mainly include an interest-free loan with a maturity period of 20 years amounting to RMB 35,560 from the Sinopec Group Company (a state-owned enterprise) through the Sinopec Finance. This borrowing is a special arrangement to reduce financing costs and improve liquidity of the Company during its initial global offering in 2000.


F-52

As of and for the years ended December 31, 20132015 and 2014,2016, no individually significant impairment losses for bad and doubtful debts were recognized in respect of amounts due from Sinopec Group Company and fellow subsidiaries, associates and joint ventures.ventures.

(b)Key management personnel emoluments

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including directors and supervisors of the Group. The key management personnel compensation is as follows:

  Years ended December 31, 
  2014  2015  2016 
  RMB’000  RMB’000  RMB’000 
Short-term employee benefits  8,009   5,225   5,648 
Retirement scheme contributions  501   510   499 
   8,510   5,735   6,147 
  Years ended December 31, 
  2012  2013  2014 
  RMB’000  RMB’000  RMB’000 
Short-term employee benefits  8,990   8,152   8,009 
Retirement scheme contributions  478   480   501 
   9,468   8,632   8,510 
             

(c)Contributions to defined contribution retirement plans

The Group participates in various defined contribution retirement plans organized by municipal and provincial governments for its staff. The details of the Group’s employee benefits plan are disclosed in Note 32.31. As of December 31, 20132015 and 2014,2016, the accrual for the contribution to post-employment benefit plans was not material.

(d)Transactions with other state-controlled entities in the PRC

The Group is a state-controlled energy and chemical enterprise and operates in an economic regime currently dominated by entities directly or indirectly controlled by the PRC government through its government authorities, agencies, affiliations and other organizations (collectively referred as “state-controlled entities”).

Apart from transactions with Sinopec Group Company and fellow subsidiaries, the Group has transactions with other state-controlled entities, include but not limited to the following:

·sales and purchasepurchases of goods and ancillary materials;
·rendering and receiving services;
·lease of assets;
·depositing and borrowing money; and
·use of public utilities.

These transactions are conducted in the ordinary course of the Group’s business on terms comparable to those with other entities that are not state-controlled.


F-51
32.31.EMPLOYEE BENEFITS PLAN

As stipulated by the regulations of the PRC, the Group participates in various defined contribution retirement plans organized by municipal and provincial governments for its staff. The Group is required to make contributions to the retirement plans at rates ranging from 18.0%17.0% to 23.0%24.0% of the salaries, bonuses and certain allowances of its staff. In addition, the Group provides a supplementary retirement plan for its staff at rates not exceeding 5% of the salaries. The Group has no other material obligation for the payment of pension benefits associated with these plans beyond the annual contributions described above. The Group’s contributions for the years ended December 31, 2012, 20132014, 2015 and 20142016 were RMB 6,603,7,660, RMB 7,2597,878 and RMB 7,634,8,385, respectively.


F-53

33.32.SEGMENT REPORTING

Segment information is presented in respect of the Group’s business segments. The format is based on the Group’s management and internal reporting structure.

In a manner consistent with the way in which information is reported internally to the Group’s chief operating decision maker for the purposes of resource allocation and performance assessment, the Group has identified the following five reportable segments. No operating segments have been aggregated to form the following reportable segments.

(i)Exploration and production, which explores and develops oil fields, produces crude oil and natural gas and sells such products to the refining segment of the Group and external customers.

(ii)Refining, which processes and purifies crude oil, that is sourced from the exploration and production segment of the Group and external suppliers, and manufactures and sells petroleum products to the chemicals and marketing and distribution segments of the Group and external customers.

(iii)
Marketing and distribution, which owns and operates oil depots and service stations in the PRC, and distributes and sells refined petroleum products (mainly gasoline and diesel) in the PRC through wholesale and retail sales networks.

(iv)Chemicals, which manufactures and sells petrochemical products, derivative petrochemical products and other chemical products mainly to external customers.

(v)Corporate and others, which largely comprise the trading activities of the import and export companies of the Group and research and development undertaken by other subsidiaries.

The segments were determined primarily because the Group manages its exploration and production, refining, marketing and distribution, chemicals, and corporate and others businesses separately. The reportable segments are each managed separately because they manufacture and/or distribute distinct products with different production processes and due to their distinct operating and gross margin characteristics.

(1)Information of reportable segmental revenues, profits or losses, assets and liabilities

The Group’s chief operating decision maker evaluates the performance and allocates resources to its operating segments on an operating income basis, without considering the effects of finance costs or investment income. Inter-segment transfer pricing is based on the market price or cost plus an appropriate margin, as specified by the Group’s policy.

Assets and liabilities dedicated to a particular segment’s operations are included in that segment’s total assets and liabilities. Segment assets include all tangible and intangible assets, except for interest in associates and joint ventures, investments, deferred tax assets, cash and cash equivalents, time deposits with financial institutions and other unallocated assets. Segment liabilities exclude short-term, income tax payable, long-term debts, loans from Sinopec Group Company and fellow subsidiaries, deferred tax liabilities and other unallocated liabilities.



F-54F-52

Information on the Group’s reportable segments is as follows:

  Years ended December 31, 
  2012  2013  2014 
  RMB  RMB  RMB 
Sales of goods         
Exploration and production         
External sales  53,738   60,848   69,550 
Inter-segment sales  174,571   158,618   141,544 
   228,309   219,466   211,094 
Refining            
External sales  193,464   194,469   175,534 
Inter-segment sales  1,071,387   1,111,004   1,092,244 
   1,264,851   1,305,473   1,267,778 
Marketing and distribution            
External sales  1,453,541   1,486,037   1,458,390 
Inter-segment sales  9,638   6,330   5,446 
   1,463,179   1,492,367   1,463,836 
Chemicals            
External sales  356,150   374,097   356,993 
Inter-segment sales  48,226   55,999   62,208 
   404,376   430,096   419,201 
Corporate and others            
External sales  676,725   717,796   721,174 
Inter-segment sales  635,046   640,224   587,663 
   1,311,771   1,358,020   1,308,837 
Elimination of inter-segment sales  (1,938,868)  (1,972,175)  (1,889,105)
Sales of goods  2,733,618   2,833,247   2,781,641 
             
Other operating revenues            
Exploration and production  28,876   22,641   16,503 
Refining  6,061   5,796   5,317 
Marketing and distribution  8,703   10,047   12,770 
Chemicals  7,588   7,491   8,284 
Corporate and others  1,199   1,089   1,399 
Other operating revenues  52,427   47,064   44,273 
             
Sales of goods and other operating revenues  2,786,045   2,880,311   2,825,914 
             
  Years ended December 31, 
  2014  2015  2016 
  RMB  RMB  RMB 
Sales of goods         
Exploration and production         
External sales  69,550   57,740   47,443 
Inter-segment sales  141,544   71,019   58,954 
   211,094   128,759   106,397 
Refining            
External sales  175,534   120,650   102,983 
Inter-segment sales  1,092,244   800,962   747,317 
   1,267,778   921,612   850,300 
Marketing and distribution            
External sales  1,458,390   1,086,098   1,027,373 
Inter-segment sales  5,446   3,056   3,480 
   1,463,836   1,089,154   1,030,853 
Chemicals            
External sales  358,617   276,640   284,289 
Inter-segment sales  63,745   43,814   38,614 
   422,362   320,454   322,903 
Corporate and others            
External sales  721,174   436,749   418,102 
Inter-segment sales  587,663   345,454   320,367 
   1,308,837   782,203   738,469 
Elimination of inter-segment sales  (1,890,642)  (1,264,305)  (1,168,732)
Sales of goods  2,783,265   1,977,877   1,880,190 
             
Other operating revenues            
Exploration and production  16,503   9,894   9,542 
Refining  5,317   5,004   5,486 
Marketing and distribution  12,770   17,512   22,004 
Chemicals  8,312   8,417   12,211 
Corporate and others  1,399   1,671   1,478 
Other operating revenues  44,301   42,498   50,721 
             
Sales of goods and other operating revenues  2,827,566   2,020,375   1,930,911 

F-55F-53


  Years ended December 31, 
  2012  2013  2014 
Result RMB  RMB  RMB 
Operating income / (loss)         
By segment         
- Exploration and production  70,054   54,793   47,057 
- Refining  (11,444)  8,599   (1,954)
- Marketing and distribution  42,652   35,143   29,449 
- Chemicals  1,178   868   (2,181)
- Corporate and others  (2,443)  (3,412)  (1,063)
- Elimination  (1,335)  794   2,179 
Total segment operating income  98,662   96,785   73,487 
Income / (loss) from associates and joint ventures            
- Exploration and production  301   358   1,117 
- Refining  (934)  (486)  (871)
- Marketing and distribution  1,034   794   963 
- Chemicals  408   418   603 
- Corporate and others  817   1,275   1,818 
Aggregate income from associates and joint ventures  1,626   2,359   3,630 
Investment income            
- Exploration and production  1   8   1 
- Refining  75   11   17 
- Marketing and distribution  131   93   71 
- Chemicals  14   —   208 
- Corporate and others  14   42   2,319 
Aggregate investment income  235   154   2,616 
Net finance costs  (9,881)  (4,246)  (14,229)
Earnings before income tax  90,642   95,052   65,504 
             
F-56


  December 31, 
  2012  2013  2014 
  RMB  RMB  RMB 
Assets         
Segment assets         
- Exploration and production  368,587   406,237   453,060 
- Refining  309,204   329,236   297,884 
- Marketing and distribution  261,724   273,872   276,298 
- Chemicals  145,867   156,373   162,685 
- Corporate and others  100,517   107,197   147,015 
Total segment assets  1,185,899   1,272,915   1,336,942 
             
Interest in associates and joint ventures  50,200   75,318   80,593 
Available-for-sale financial assets  2,001   3,730   868 
Deferred tax assets  5,539   4,141   6,979 
Cash and cash equivalents and time deposits with financial institutions  10,864   15,101   10,100 
Other unallocated assets  3,441   11,711   15,886 
Total assets  1,257,944   1,382,916   1,451,368 
             
Liabilities            
Segment liabilities            
- Exploration and production  90,430   104,233   100,552 
- Refining  62,271   69,029   67,327 
- Marketing and distribution  87,785   101,564   118,493 
- Chemicals  30,100   23,670   27,532 
- Corporate and others  139,811   129,816   138,930 
Total segment liabilities  410,397   428,312   452,834 
             
Short-term debts  73,063   109,806   75,183 
Income tax payable  6,045   3,096   1,091 
Long-term debts  124,518   107,234   107,787 
Loans from Sinopec Group Company and fellow subsidiaries  80,517   92,420   146,110 
Deferred tax liabilities  7,294   7,977   7,820 
Other unallocated liabilities  8,074   12,445   14,966 
Total liabilities  709,908   761,290   805,791 
             

  Years ended December 31, 
  2014  2015  2016 
Result RMB  RMB  RMB 
Operating income/(loss)         
By segment         
- Exploration and production  47,057   (17,418)  (36,641)
- Refining  (1,954)  20,959   56,265 
- Marketing and distribution  29,449   28,855   32,153 
- Chemicals  (2,229)  19,476   20,623 
- Corporate and others  (1,063)  384   3,212 
- Elimination  2,179   4,566   1,581 
Total segment operating income  73,439   56,822   77,193 
Income/(loss) from associates and joint ventures            
- Exploration and production  1,117   633   (1,203)
- Refining  (871)  725   1,075 
- Marketing and distribution  963   1,379   2,362 
- Chemicals  838   3,343   5,696 
- Corporate and others  1,818   2,282   1,376 
Aggregate income from associates and joint ventures  3,865   8,362   9,306 
Investment income            
- Exploration and production  1   835   24 
- Refining  17   (8)  (4)
- Marketing and distribution  71   70   90 
- Chemicals  296   41   119 
- Corporate and others  2,319   350   34 
- Elimination －   (822) － 
Aggregate investment income  2,704   466   263 
Net finance costs  (14,190)  (9,239)  (6,611)
Earnings before income tax  65,818   56,411   80,151 


F-57F-54

  December 31, 
  2014  2015  2016 
  RMB  RMB  RMB 
Assets         
Segment assets         
- Exploration and production  453,060   447,307   402,476 
- Refining  297,884   264,573   260,903 
- Marketing and distribution  276,298   283,416   292,328 
- Chemicals  163,813   151,646   144,371 
- Corporate and others  147,015   108,921   95,263 
Total segment assets  1,338,070   1,255,863   1,195,341 
             
Interest in associates and joint ventures  81,901   84,293   116,812 
Available-for-sale financial assets  1,487   10,964   11,408 
Deferred tax assets  6,979   7,469   7,214 
Cash and cash equivalents and time deposits with financial institutions  11,271   69,666   142,497 
Other unallocated assets  15,886   19,013   25,337 
Total assets  1,455,594   1,447,268   1,498,609 
             
Liabilities            
Segment liabilities            
- Exploration and production  100,552   96,773   95,944 
- Refining  67,327   58,578   82,170 
- Marketing and distribution  118,493   118,897   133,303 
- Chemicals  27,726   27,243   32,072 
- Corporate and others  138,930   104,194   97,080 
Total segment liabilities  453,028   405,685   440,569 
             
Short-term debts  75,183   41,517   56,239 
Income tax payable  1,091   1,048   6,051 
Long-term debts  107,787   95,446   72,674 
Loans from Sinopec Group Company and fellow subsidiaries  146,110   88,229   63,352 
Deferred tax liabilities  7,820   8,259   7,661 
Other unallocated liabilities  14,972   18,923   20,828 
Total liabilities  805,991   659,107   667,374 


F-55
Segment capital expenditure is the total cost incurred during the year to acquire segment assets that are expected to be used for more than one year.

 Years ended December 31,  Years ended December 31, 
 2012  2013  2014  2014  2015  2016 
 RMB  RMB  RMB  RMB  RMB  RMB 
Capital expenditure                  
Exploration and production  78,272   105,311   80,196   80,196   54,710   32,187 
Refining  32,161   26,064   27,957   27,957   15,132   14,347 
Marketing and distribution  27,232   29,486   26,989   26,989   22,115   18,493 
Chemicals  18,996   19,189   15,850   15,944   17,634   8,849 
Corporate and others  2,061   5,076   3,648   3,648   2,821   2,580 
  158,722   185,126   154,640   154,734   112,412   76,456 
Depreciation, depletion and amortization                        
Exploration and production  39,283   44,126   48,902   48,902   52,155   61,929 
Refining  12,270   13,859   15,015   15,015   16,557   17,209 
Marketing and distribution  8,792   11,127   12,491   12,491   14,075   14,540 
Chemicals  8,883   10,757   12,130   12,229   12,088   12,654 
Corporate and others  1,228   1,396   1,559   1,559   1,585   2,093 
  70,456   81,265   90,097   90,196   96,460   108,425 
Impairment losses on long-lived assets                        
Exploration and production  1,006   2,523   2,436   2,436   4,864   11,605 
Refining  —   88   29   29   9   1,655 
Marketing and distribution  8   35   40   40   19   267 
Chemicals  —   —   1,106   1,106   142   2,898 
Corporate and others  —   15   8   8   112  － 
  1,014   2,661   3,619   3,619   5,146   16,425 
            

(2)       
(2)Geographical information

The following tables set out information about the geographical information of (i) the Group’s external sales and (ii) the Group’s non-current assets, excluding financial instruments and deferred tax assets. In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers, and segment assets are based on the geographical location of the assets.

 Years ended December 31,  Years ended December 31, 
 2012  2013  2014  2014  2015  2016 
 RMB  RMB  RMB  RMB  RMB  RMB 
External sales                  
Mainland China  2,088,043   2,107,202   2,062,775   2,064,427   1,580,856   1,488,117 
Others  698,002   773,109   763,139   763,139   439,519   442,794 
  2,786,045   2,880,311   2,825,914   2,827,566   2,020,375   1,930,911 
      
 December 31,  December 31, 
  2012   2013   2014   2014   2015   2016 
 RMB  RMB  RMB  RMB  RMB  RMB 
Non-current assets                        
Mainland China  862,044   941,046   1,003,521   1,005,713   1,029,318   1,000,209 
Others  22,123   51,181   64,589   64,589   56,081   45,887 
  884,167   992,227   1,068,110   1,070,302   1,085,399   1,046,096 
            

F-58F-56

34.33.PRINCIPAL SUBSIDIARIES

As of December 31, 2014,2016, the following list contains the particulars of subsidiaries which principally affected the results, assets and liabilities of the Group.

Name of company Particulars of issued capital Interests held by the Company  Interests held by non-controlling Principal activities
China Petrochemical International Company Limited RMB 1,400  100.00   — Trading of petrochemical products
Sinopec Marketing Co., Ltd. ("Marketing Company") (i) RMB 20,000  100.00   — Marketing and distribution of refined petroleum products
Name of Company Particulars of issued capital Interests held by the Company %  Interests held by non-controlling interests % Principal activities
Sinopec International Petroleum Exploration and Production Limited ("SIPL") RMB 8,000  100.00   — Investment in exploration, production and sale of petroleum and natural gas
Sinopec Great Wall Energy & Chemical Company Limited RMB 20,739  100.00   — Coal chemical industry investment management, production and sale of coal chemical products
Sinopec Yangzi Petrochemical Company Limited RMB 13,203  100.00   — Manufacturing of intermediate petrochemical products and petroleum products RMB 13,203  100.00   — Manufacturing of intermediate  petrochemical products and petroleum products
Fujian Petrochemical Company Limited ("Fujian Petrochemical") (ii) RMB 5,745  50.00   50.00 Manufacturing of plastics, intermediate petrochemical products and petroleum products
Sinopec Shell (Jiangsu) Petroleum Marketing Company Limited RMB 830  60.00   40.00 Marketing and distribution of refined petroleum products
BP Sinopec (Zhejiang) Petroleum Company Limited RMB 800  60.00   40.00 Marketing and distribution of refined petroleum products
Sinopec Qingdao Refining and Chemical Company Limited RMB 5,000  85.00   15.00 Manufacturing of intermediate petrochemical products and petroleum products
China International United Petroleum and Chemical Company Limited RMB 3,000  100.00   — Trading of crude oil and petrochemical products
Sinopec Senmei (Fujian) Petroleum Limited RMB 1,840  55.00   45.00 Marketing and distribution of refined petroleum products
Sinopec (Hong Kong) Limited HKD 13,277  100.00   — Trading of petrochemical products
Sinopec Hainan Refining and Chemical Company Limited RMB 3,986  75.00   25.00 Manufacturing of intermediate petrochemical products and petroleum products
Sinopec Shanghai Petrochemical Company Limited ("Shanghai Petrochemical") RMB 7,200  50.56   49.44 Manufacturing of synthetic fibres, resin and plastics, intermediate petrochemical products and petroleum products
Sinopec Kantons Holdings Limited ("Sinopec Kantons") HKD 248  60.34   39.66 Trading of crude oil and petroleum products
Sinopec Yizheng Chemical Fibre Linited Liability Company (iii) RMB 4,000  100.00   — Production and sale of polyester chips and polyester fibres
Sinopec Pipeline Storage & Transportation Company Limited RMB 12,000  100.00   — Pipeline storage and transportation of crude oil
Sinopec Yizheng Chemical Fibre Limited Liability Company RMB 4,000  100.00   — Production and sale of polyester chips and polyester fibres
Sinopec Lubricant Company Limited RMB 3,374  100.00   — Production and sale of refined petroleum products, lubricant base oil, and petrochemical materials
Sinopec Qingdao Petrochemical Company Limited RMB 1,595  100.00   — Manufacturing of intermediate petrochemical products and petroleum products RMB 1,595  100.00   — Manufacturing of intermediate petrochemical products and petroleum products
Sinopec Chemical Sales Company Limited RMB 1,000  100.00   — Marketing and distribution of petrochemical products RMB 1,000  100.00   — Marketing and distribution of  petrochemical products
Sinopec International Petroleum Exploration and Production Limited ("SIPL") RMB 8,000  100.00   — Investment in exploration, production and sales of petroleum and natural gas
Sinopec Fuel Oil Sales Company Limited RMB 2,200  100.00   — Marketing and distribution of refined petroleum products
Sinopec Great Wall Energy & Chemical Company Limited ("GWEC")(iv) RMB 18,863  100.00   — Coal chemical industry investment Management, production and sale of coal chemical products
Sinopec Great Wall Energy & Chemical (Ningxia) Company Limited ("Ningxia Nenghua")(iv) RMB 5,130  95.00   5.00 Production and sale of electricity, cement and coal
China International United Petroleum and Chemical Company Limited RMB 3,000  100.00   — Trading of crude oil and petrochemical products
Sinopec Overseas Investment Holding Limited ("SOIH") USD 1,638  100.00   — Investment holding
Sinopec Catalyst Company Limited RMB 1,500  100.00   — Production and sale of catalyst products
China Petrochemical International Company Limited RMB 1,400  100.00   — Trading of petrochemical products
Sinopec Beihai Refining and Chemical Limited Liability Company RMB 5,294  98.98   1.02 Import and processing of crude oil, production, storage and sale of petroleum products and petrochemical products RMB 5,294  98.98   1.02 Import and processing of crude oil, production, storage and sale of petroleum products and petrochemical products
Sinopec-SK(Wuhan) Petrochemical Company Limited ("Zhonghan Wuhan") RMB 6,270  65.00   35.00 Production, sale, research and development of ethylene and downstream by products
Sinopec Qingdao Refining and Chemical Company Limited RMB 5,000  85.00   15.00 Manufacturing of intermediate petrochemical products and petroleum products
Sinopec Zhanjiang Dongxing Petrochemical Company Limited RMB 4,397  75.00   25.00 Manufacturing of intermediate petrochemical products and petroleum products RMB 4,397  75.00   25.00 Manufacturing of intermediate petrochemical products and petroleum products
Sinopec Hainan Refining and Chemical Company Limited RMB 3,986  75.00   25.00 Manufacturing of intermediate petrochemical products and petroleum products
Sinopec Marketing Company Limited ("Marketing Company") (i) RMB 28,403  70.42   29.58 Marketing and distribution of refined petroleum products
Sinopec–SK(Wuhan) Petrochemical Company Limited ("Zhonghan Wuhan") RMB 6,270  65.00   35.00 Production, sale, research and development of ethylene and  downstream byproducts
Sinopec Kantons Holdings Limited ("Sinopec Kantons") HKD 248  60.34   39.66 Trading of crude oil and petroleum products
Gaoqiao Petrochemical Company Limited (Note 1) RMB 10,000  55.00   45.00 Manufacturing of intermediate petrochemical products and petroleum products
Sinopec Shanghai Petrochemical Company Limited ("Shanghai Petrochemical") RMB 10,800  50.56   49.44 Manufacturing of synthetic fibres, resin and plastics, intermediate petrochemical products and petroleum products
Fujian Petrochemical Company Limited ("Fujian Petrochemical") (ii) RMB 5,745  50.00   50.00 Manufacturing of plastics, intermediate petrochemical products and petroleum  products


F-59F-57

Except for Sinopec Kantons and Sinopec (Hong Kong) Limited,SOIH, which are incorporated in Bermuda and Hong Kong respectively, all of the above principal subsidiaries are incorporated and operate their business principally in the PRC. All of the above principal subsidiaries are limited companies.

Note:

(i)Pursuant to the resolution of the Company’s Meeting of Board of Directors held on February 19,February19, 2014, the Company's business under its marketing and distribution segment of the Group was injected to Marketing Company, a wholly-owned subsidiary of the Group on April 1, 2014.

On September 12, 2014, Marketing Company entered into the "Capital Injection Agreement relating to Marketing Company" with a number of domestic and foreign investors, pursuant to which the investors shall subscribe for equity interest in Marketing Company in cash upon the relevant approvals for this capital injection being obtained, an aggregate capital contribution of RMB 105,044 was made to the Marketing Company by 25 investors, representing 29.58% equity interest in the Marketing Company on March 6, 2015. The difference between the contributions from and the net assets acquired by investors has been credited to capital reserve in amount of RMB 56,224 and to other comprehensive income in amount of RMB 446 of the equity attributable to the shareholders of the Company, respectively.

(ii)The Group consolidated the financial statements of the entity because it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

(iii)Pursuant to the Share Repurchase Agreement and Disposal Agreement entered into between the Company and Yizheng Chemical Fibre Co., Ltd. on September 12, 2014, Yizheng Chemical Fibre Co., Ltd. repurchased and cancelled the 40.25% of its equity interests held by the Company in exchange for the transfer of its outgoing business to the Company, pursuant to which this business was injected into Sinopec Yizheng Chemical Fibre Limited Liability Company.

Pursuant to the Acquisition Agreement between Sinopec Group Company and Yizheng Chemical Fibre Co., Ltd. on the same date, Yizheng Chemical Fibre Co., Ltd. issued shares to Sinopec Group Company for the acquisition of a 100% equity interest of Sinopec Oilfield Service Corporation (a wholly-owned subsidiary of Sinopec Group Company). The above transactions were inter-conditional and were completed in December 2014.

The Group accounted for the transaction pursuant to the Share Repurchase Agreement as a transaction with non-controlling interests since the control of business had not been lost, which resulted in an increase in capital reserve of the Group's consolidated financial statement amounting to RMB 3,227 and decrease of non-controlling interests amounting to RMB 2,867.

(iv)During the year ended December 31, 2014, the Company increased its investment in GWEC by RMB 5,712 . Further, on August 1, 2014, GWEC acquired an additional 45% of the equity interest in shares in Ningxia Nenghua (GWEC previously held a 50% equity interest) and obtained control of Ningxia Nenghua (a coal chemical producer) which the Group accounted for as a subsidiary of GWEC thereafter. The cash consideration was RMB 2,593. The fair value of the 50% equity interest held before the business combination is RMB 2,881. The fair value of the assets and liabilities of Ningxia Nenghua primarily include construction in progress amounting to RMB 14,094, property, plant and equipment amounting to RMB 3,293 and borrowings amounting to RMB 11,862 and no goodwill has arisen from the business combination.
Summarized financial information on subsidiaries with material non-controlling interests

Set out below are the summarized financial information which the amount before inter-company eliminations for each subsidiary that has non-controlling interests that are material to the Group.


F-60

Summarized consolidated balance sheet

  Marketing Company SIPL Shanghai Petrochemical Fujian Petrochemical Sinopec Kantons Zhonghan Wuhan 
  At December 31, At December 31, At December 31, At December 31, At December 31, At December 31, 
  2015 2016 2015 2016 2015 2016 2015 2016 2015  2016 2015 2016 
  RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB 
Current assets  102,948  121,260  20,231  18,116  8,144  14,876  140  926  1,732 1,352  1,386  1,489 
Current liabilities  (156,028) (168,366) (5,468) (824) (7,726) (8,942) (73) (812) (3,488)(2,891) (9,885) (7,521)
Net current (liabilities)/assets  (53,080) (47,106) 14,763  17,292  418  5,934  67  114  (1,756)(1,539)  (8,499) (6,032)
Non–current assets  240,312  246,514  40,075  40,067  19,676  19,070  5,487  7,845  13,025 13,228  15,815  14,686 
Non–current liabilities  (1,628) (1,460) (34,320) (39,322) –  –  (831) (721) (3,384)(3,101) –  – 
Net non–current assets  238,684  245,054  5,755  745  19,676  19,070  4,656  7,124  9,641 10,127  15,815  14,686 
Net assets  185,604  197,948  20,518  18,037  20,094  25,004  4,723  7,238  7,885 8,588  7,316  8,654 
Attributable to owners of the Company  126,100  134,393  4,331  2,784  10,009  12,500  2,361  3,619  4,738 5,162  4,755  5,625 
Attributable to non–controlling interests  59,504  63,555  16,187  15,253  10,085  12,504  2,362  3,619  3,147 3,426  2,561  3,029 
  Fujian Petrochemical Shanghai Petrochemical Sinopec Kantons SIPL Marketing Company(i) Zhonghan Wuhan
  At  At  At  At  At  At  At  At  At  At  At 
  December 31,  December 31,  December 31,  December 31,  December 31,  December 31,  December 31,  December 31,  December 31,  December 31,  December 31, 
  2013  2014  2013  2014  2013  2014  2013  2014  2014  2013  2014 
  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB 
Current assets  281   436   14,486   9,510   1,886   1,581   13,983   15,416   131,012  —   1,724 
Current liabilities  (197)  (224)  (18,017)  (12,485)  (972)  (928)  (2,414)  (2,387)  (280,010) —   (13,023)
Net current assets / (liabilities)  84   212   (3,531)  (2,975)  914   653   11,569   13,029   (148,998) —   (11,299)
Non-current assets  4,596   4,050   22,151   21,395   6,912   7,536   46,143   47,623   229,281   4,033   16,874 
Non-current liabilities  (796)  (996)  (628)  (1,649)  (77)  (82)  (32,831)  (35,877)  (1,456) ­—  — 
Net non-current assets  3,800   3,054   21,523   19,746   6,835   7,454   13,312   11,746   227,825   4,033   16,874 
Net assets  3,884   3,266   17,992   16,771   7,749   8,107   24,881   24,775   78,827   4,033   5,575 
Attributable to owners of the Company  1,942   1,633   8,399   8,342   4,676   4,873   7,494   7,370   72,701   2,621   3,624 
Attributable to non-controlling interests (v)  1,942   1,633   9,593   8,429   3,073   3,234   17,387   17,405   6,126   1,412   1,951 


Note:
(v)On May 9, 2013, Sinopec Kantons issued 412,500,000 ordinary shares to non-controlling interests with total consideration amounted to HK$2,681.25 million.

The Group and a fellow subsidiary of Sinopec Group Company contributed USD 1,473 million to establish Sinopec International Petroleum E&P Hongkong Overseas Limited in Hong Kong through which three new joint ventures were acquired during the year ended 31 December 2013 (Note 19).
F-58
(vi)Zhonghan Wuhan was established in 2013.

Summarized consolidated statement of comprehensive income

Year ended  December 31, Fujian Petrochemical Shanghai Petrochemical Sinopec Kantons SIPL Marketing Company(i) Zhonghan Wuhan(vi)
  2012  2013  2014  2012  2013  2014  2012  2013  2014  2012  2013  2014  2014  2013  2014 
  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB 
Operating revenues  6,361   5,379   7,322   93,008   115,490   102,126   17,863   18,647   15,227   15,911   13,652   9,038   1,472,232   —   18,365 
Net income / (loss) for the year  (1,007)  (716)  (745)  (1,505)  2,066   (676)  236   392   554   5,735   4,250   3,046   22,914   (43)  137 
Total comprehensive (loss) / income  (1,006)  (714)  (750)  (1,505)  2,066   (676)  236   620   399   5,693   3,814   (106)  22,934   (43)  137 
(Loss) / Profit attributable to non-controlling interests  (504)  (358)  (375)  (656)  924   (326)  85   246   158   2,622   1,774   18   930   (15)  48 
Dividends declared to non-controlling interests  —   —   —   187   196   271   7   28   39   —   —   —   —   —   — 
Year ended  December 31, Marketing Company (i) SIPL Shanghai Petrochemical Fujian Petrochemical Sinopec Kantons Zhonghan Wuhan 
  2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 
  RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB 
Operating revenues  1,472,232  1,103,934  1,050,294  9,038  6,557  4,016  102,126  80,748  77,843  7,322  5,532  4,968  16,337  1,642 1,512  18,365  14,077  11,703 
Net income/ (loss) for the year  22,914  23,684  26,461  3,046  (222) (4,604) (676) 3,310  5,981  (745) 1,456  2,513  805  825 860  137  1,738  1,558 
Total Comprehensive income/ (loss)  22,934  24,391  27,385  (106) (4,257) (2,481) (676) 3,310  6,000  (750) 1,456  2,513  622  302 879  137  1,738  1,558 
Comprehensive income/(loss) attributable to non-controlling interests  930  7,755  9,028  18  (1,218) (3,279) (326) 1,655  2,964  (375) 728  1,256  247  120 349  48  608  545 
Dividends paid to  non-controlling interests  –  7,356  4,932  –  –  –  271  10  563  –  –  –  39  40 51  –  –  – 

F-61

Summarized statement of cash flows

 Marketing Company SIPL Shanghai Petrochemical Fujian Petrochemical Sinopec Kantons Zhonghan Wuhan 
Year ended December 31, 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 
  RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB 
Net cash generated from/(used in) operating activities  44,337  33,196  50,840  5,383  4,059  2,576  3,662  4,933  7,182  197  (179) 617  880  1,185 505  1,467  4,223  3,636 
Net cash (used in)/generated from investing activities  (46,140) 21,180  (31,573) (8,282) (4,052) 2,729  (910) (439) (190) (303) 76  54  (1,120) (504)261  (2,643) (4,869) (3,080)
Net cash generated from/(used in) financing activities  1,584  (42,777) (20,424) 1,740  637  (4,414) (2,606) (3,696) (2,637) 264  (176) (55) (414) (443)(1,338) 1,513  588  (682)
Net (decrease)/ increase in cash and cash equivalents  (219) 11,599  (1,157) (1,159) 644  891  146  798  4,355  158  (279) 616  (654) 238 (572) 337  (58) (126)
Cash and cash equivalents as of January 1  2,878  2,682  14,914  2,468  1,327  2,042  133  279  1,077  222  380  101  1,279  630 886  –  337  260 
Effect of foreign currency exchange rate changes  23  633  616  18  71  112  –  –  9  –  –  –  5  18 (25) –  (19) – 
Cash and cash equivalents as of December 31  2,682  14,914  14,373  1,327  2,042  3,045  279  1,077  5,441  380  101  717  630  886 289  337  260  134 
Year ended December 31, Fujian Petrochemical Shanghai Petrochemical Sinopec Kantons SIPL Marketing Company(i) Zhonghan Wuhan
  2012  2013  2014  2012  2013  2014  2012  2013  2014  2012  2013  2014  2014  2013  2014 
  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB 
Net cash (used) / generated from operating actities  (481)  523   197   (2,066)  5,098   3,662   245   326   225   8,097   7,006   5,383   44,337   —   1,467 
Net cash used in investing activities  (288)  (698)  (303)  (4,062)  (629)  (910)  (1,455)  (3,024)  (814)  (3,040)  (36,924)  (8,282)  (46,140)  —   (2,643)
Net cash generated from/ (used in) financing activities  600   369   264   6,198   (4,497)  (2,606)  2,530   2,050   (65)  (4,399)  31,662   1,740   1,584   —   1,513 
Net increase/ (decrease) in cash and cash equivalents  (169)  194   158   70   (28)  146   1,320   (648)  (654)  (658)  1,744   (1,159)  (219)  —   337 
Cash and cash equivalents at January 1  197   28   222   91   161   133   626   1,920   1,295   179   824   2,468   2,878   —   — 
Effect of foreign currency exchange rate changes  —   —   —   —   —   —   4   23   (13)  (13)  (100)  18   23   —   — 
Cash and cash equivalents at December 31  28   222   380   161   133   279   1,950   1,295   628   824   2,468   1,327   2,682   —   337 



F-62F-59

35.34.FINANCIAL RISK MANAGEMENT AND FAIR VALUES

Overview

Financial assets of the Group include cash and cash equivalents, time deposits with financial institutions, investments, trade accounts receivable, bills receivable, amounts due from Sinopec Group Company and fellow subsidiaries, amounts due from associates and joint ventures, available-for-sale financial assets, derivative financial instruments and other receivables. Financial liabilities of the Group include short-term and long-term debts, loans from Sinopec Group Company and fellow subsidiaries, salaries and welfare payable, interest payable, trade accounts payable, bills payable, amounts due to Sinopec Group Company and fellow subsidiaries, derivative financial instruments and other payables.

The Group has exposure to the following risks from its use of financial instruments:

·credit risk;
·liquidity risk;
·market risk; and
·equity price risk.

The Board of Directors has overall responsibility for the establishment, oversight of the Group’s risk management framework, and developing and monitoring the Group’s risk management policies.

The Group’s risk management policies are established to identify and analyze the risks faced by the Group, and set appropriate risk limits and controls to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management controls and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. Internal audit department undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Group’s audit committee.

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s deposits placed with financial institutions and receivables from customers. To limit exposure to credit risk relating to deposits, the Group primarily places cash deposits only with large financial institutions in the PRC with acceptable credit ratings. The majority of the Group’s trade accounts receivable relate to sales of petroleum and chemical products to related parties and third parties operating in the petroleum and chemical industries. TheNo single customer accounted for greater than 10% of total accounts receivable as of December 31, 2016, except the amounts due from Sinopec Group Company and fellow subsidiaries. Management performs ongoing credit evaluations of itsthe Group’s customers’ financial condition and generally does not require collateral on trade accounts receivable. The Group maintains an impairment loss for doubtful accounts and actual losses have been within management’s expectations.

The carrying amounts of cash and cash equivalents, time deposits with financial institutions, trade accounts and bills receivables, derivative financial instruments and other receivables, represent the Group’s maximum exposure to credit risk in relation to financial assets.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach in managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed capital conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Management prepares monthly cash flow budget to ensure that the Group will always have sufficient liquidity to meet its financial obligations as they fall due. The Group arranges and negotiates financing with financial institutions and maintains a certain level of standby credit facilities to reduce the Group’s liquidity risk.



F-63F-60

As of December 31, 20132015 and 2014,2016, the Group has standby credit facilities with several PRC financial institutions which provide borrowings up to RMB 289,106297,997 and RMB 302,570256,375 on an unsecured basis, at a weighted average interest rate of 3.12%2.50% and 3.51%3.57% per annum, respectively. As of December 31, 20132015 and 2014,2016, the Group’s outstanding borrowings under these facilities were RMB 44,96632,991 and RMB 78,98336,933 and were included in debts, respectively.

The following table sets out the remaining contractual maturities at the balance sheet date of the Group’s financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on prevailing rates current at the balance sheet date) and the earliest date the Group would be required to repay:

  December 31, 2015 
  Carrying amount  Total contractual undiscounted cash flow  Within 1 year or on demand  More than 1 year but less than 2 years  More than 2 years but less than 5 years  More than 5 years 
  RMB  RMB  RMB  RMB  RMB  RMB 
                   
Short-term debts  71,517   72,476   72,476  －  －  － 
Long-term debts  95,446   110,678   3,747   41,176   41,637   24,118 
Loans from Sinopec Group Company and fellow subsidiaries  88,229   89,258   44,439   464   8,795   35,560 
Trade accounts payable  130,558   130,558   130,558  －  －  － 
Bills payable  3,566   3,566   3,566  －  －  － 
Accrued expenses and other payables  88,082   88,082   88,082  －  －  － 
   477,398   494,618   342,868   41,640   50,432   59,678 
  December 31, 2013 
  Carrying amount  Total contractual undiscounted cash flow  Within 1 year or on demand  More than 1 year but less than 2 years  More than 2 years but less than 5 years  More than 5 years 
  RMB  RMB  RMB  RMB  RMB  RMB 
                   
Short-term debts  109,806   111,753   111,753   —   —   — 
Long-term debts  107,234   134,403   3,942   14,799   82,326   33,336 
Loans from Sinopec Group Company and fellow subsidiaries  92,420   93,030   54,373   484   2,613   35,560 
Trade accounts payable  202,724   202,724   202,724   —   —   — 
Bills payable  4,526   4,526   4,526   —   —   — 
Accrued expenses and other payables  83,735   83,735   83,735   —   —   — 
   600,445   630,171   461,053   15,283   84,939   68,896 
                         

 December 31, 2014  December 31, 2016 
 Carrying amount  Total contractual undiscounted cash flow  Within 1 year or on demand  More than 1 year but less than 2 years  More than 2 years but less than 5 years  More than 5 years  Carrying amount  Total contractual undiscounted cash flow  Within 1 year or on demand  More than 1 year but less than 2 years  More than 2 years but less than 5 years  More than 5 years 
 RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB 
                                    
Short-term debts  75,183   75,794   75,794   —   —   —   56,239   57,515   57,515  －  －  － 
Long-term debts  107,787   129,849   4,328   16,411   63,221   45,889   72,674   85,021   2,672   27,277   30,535   24,537 
Loans from Sinopec Group Company and fellow subsidiaries  146,110   147,321   103,475   1,301   6,634   35,911   63,352   63,678   18,790   2,092   42,796  － 
Trade accounts payable  198,366   198,366   198,366   —   —   —   174,301   174,301   174,301  －  －  － 
Bills payable  4,577   4,577   4,577   —   —   —   5,828   5,828   5,828  －  －  － 
Accrued expenses and other payables  104,571   104,571   104,571   —   —   —   81,781   81,781   81,781  －  －  － 
  636,594   660,478   491,111   17,712   69,855   81,800   454,175   468,124   340,887   29,369   73,331   24,537 
                        

Management believes that the Group’s current cash on hand, expected cash flows from operations and available standby credit facilities from financial institutions will be sufficient to meet the Group’s workingshort-term and long-term capital requirements and repay its short-term debts and obligations when they become due.requirements.

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimisingoptimizing the return on risk.

Currency risk

Currency risk arises on financial instruments that are denominated in a currency other than the functional currency in which they are measured. The Group’s currency risk exposure primarily relates to short-term and long-term debts and loans from Sinopec Group Company and fellow subsidiaries denominated in US Dollars, Japanese Yen

F-61
Euro, Singapore Dollars and Hong Kong Dollars. The Group enters into foreign exchange contracts to manage its currency risk exposure.exposure.


F-64

Included in short-term and long-term debts and loans from Sinopec Group Company and fellow subsidiaries of the Group are the following amounts denominated in a currency other than the functional currency of the entity to which they relate:

December 31,  December 31, 
Gross exposure arising from loans and borrowings2013 2014  2015 2016 
US DollarsUSD  4,118 USD  8,382  USD 1,181 USD      126 
EuroEUR － EUR  57  EUR 1,108 EUR          1 
Japanese YenJPY  9,711 JPY  8,662 
Singapore Dollars － SGD          4 
Hong Kong DollarsHKD  13,931 HKD  6  HKD       6 HKD         6 

A 5 percent strengtheningstrengthening/weakening of RenminbiRMB against the following currencies as of December 31, 20132015 and 20142016 would have decreased/increased net income of the Group by the amounts shown below. This analysis has been determined assuming that the change in foreign exchange rates had occurred at the balance sheet date and had been applied to the foreign currency balances to which the Group has significant exposure as stated above, and that all other variables, in particular interest rates, remain constant.  The analysis is performed on the same basis for 2013.2015.

 December 31,  December 31, 
 2013  2014  2015  2016 
US Dollars  941   1,923   288   33 
Euro －   16   295  － 
Japanese Yen  21   17 
Hong Kong Dollars  411  － 
Singapore Dollars －   1 

Other than the amounts as disclosed above, the amounts of other financial assets and liabilities of the Group are substantially denominated in the functional currency of respective entity ofwithin the Group.

Interest rate risk

The Group’s interest rate risk exposure arises primarily from its short-term and long-term debts. Debts bearing interest at variable rates and at fixed rates expose the Group to cash flow interest rate risk and fair value interest rate risk respectively. The interest rates of short-term and long-term debts, and loans from Sinopec Group Company and fellow subsidiaries of the Group are disclosed in Note 24.

As of December 31, 2013 and 2014,2015, it is estimated that a general increase / increase/decrease of 100 basis points in variable interest rates, with all other variables held constant, would decrease / decrease/increase the Group’sGroup's net income by approximately RMB 411 and91. As of December 31, 2016, it is estimated that a general increase/decrease of 100 basis points in variable interest rates, with all other variables held constant, would increase/decrease the Group's net income by approximately RMB 1,199, respectively.44. This sensitivity analysis has been determined assuming that the change of interest rates was applied to the Group’s debts outstanding at the balance sheet date with exposure to cash flow interest rate risk.risk, which in part be eliminated by cash holdings on a variable interest rates basis. The analysis is performed on the same basis for 2013.2015.

Commodity price risk

The Group engages in oil and gas operations and is exposed to commodity price risk related to price volatility of crude oil, refined oil products and chemical products. The fluctuations in prices of crude oil, refined oil products and chemical products could have significant impact on the Group. The Group uses derivative financial instruments, including commodity futures and swaps, to manage a portion of this risk. As of December, 31, 20132015 and 2014,2016, the Group had certain commodity contracts of crude oil, refined oil productsproduct and chemical products designated as qualified cash flow hedges and economic hedges. The fair values of these derivative financial instruments as of December 31, 20132015 and 20142016 are set out in Notes 14 and 26.

As of December 31, 2013,2015, it is estimated that a general increase/decrease of USD 10 per barrel in crude oil and refined oil products,basic price of derivative financial instruments, with all other variables held constant, would increase/decreaseimpact the fair value of derivative financial instruments, which would decrease/increase the Group’s net income and retainedretain earnings by approximately RMB 18,1,951, and increase/decreasedecrease/increase the Group’s other reserves by approximately RMB 2,806.3,052. As

F-62
of December 31, 2014,2016, it is estimated that a general increase/decrease of USD 10 per barrel in crude oil and refined oil products,basic price of derivative financial instruments, with all other variables held constant, would impact the fair value of derivative financial instruments, which would decrease/increase the Group’s net income and retain earnings by approximately RMB 1,167,634 and increase/decreasedecrease/increase the Group’s other reserves by approximately RMB 2,206.4,007. This sensitivity analysis has been determined assuming that the change in prices had occurred at the balance sheet date and the change was applied to the Group’s derivative financial instruments at that date with exposure to commodity price risk. The analysis is performed on the same basis for 2013.


F-65

Equity price risk

The Group is exposed to equity price risk arising from changes in the Company’s own share price to the extent that the Company’s own equity instruments underlie the fair values of derivatives of the Group. As of December 31, 2014, the Group’s exposure to equity price risk is the derivative embedded in the 2011 Convertible Bonds issued by the Company as disclosed in Note 24(v).

As of December 31, 2013, it is estimated that an increase of 20% in the Company’s own share price would decrease the Group’s net income by approximately RMB 1,333 while a decrease of 20% in the Company’s own share price would increase the Group’s net income by approximately RMB 737. As of December 31, 2014, it is estimated that an increase of 20% in the Company’s own share price would decrease the Group’s net income for the year by approximately RMB 2,730 while a decrease of 20% in the Company’s own share price would increase the Group’s net income for the year by approximately RMB 2,702. This sensitivity analysis has been determined assuming that the changes in the Company’s own share price had occurred at the balance sheet date and that all other variables remain constant. The analysis is performed on the same basis for 2013.2015.

Fair values

(i)Financial instruments carried at fair value

The following table presents the carrying value of financial instruments measured at fair value at the balance sheet date across the three levels of the fair value hierarchy defined in IFRS 7, Financial Instruments: Disclosures, with the fair value of each financial instrument categorized in its entirety based on the lowest level of input that is significant to that fair value measurement. The levels are defined as follows:

·Level 1 (highest level): fair values measured using quoted prices (unadjusted) in active markets for identical financial instruments.

·Level 2: fair values measured using quoted prices in active markets for similar financial instruments, or using valuation techniques in which all significant inputs are directly or indirectly based on observable market data.

·Level 3 (lowest level): fair values measured using valuation techniques in which any significant input is not based on observable market data.

  December 31, 2013 
  Level 1  Level 2  Level 3  Total 
  RMB  RMB  RMB  RMB 
Assets            
Available-for-sale financial assets:            
- Listed  1,964   —   —   1,964 
Derivative financial instruments:                
- Derivative financial assets  348   4,316   —   4,664 
   2,312   4,316   —   6,628 
                 
Liabilities                
Derivative financial instruments:                
- Embedded derivative components of the convertible bonds
  —   548   —   548 
- Other derivative financial liabilities  339   2,285   —   2,624 
   339   2,833   —   3,172 
 December 31, 2014  December 31, 2015 
 Level 1  Level 2  Level 3  Total  Level 1  Level 2  Level 3  Total 
 RMB  RMB  RMB  RMB  RMB  RMB  RMB  RMB 
Assets                        
Available-for-sale financial assets:                        
- Listed  183  
—
   
—
   183   261  －  －   261 
Derivative financial instruments:                             
- Derivative financial assets  2,885   9,737   
—
   12,622   4,235   3,640   －   7,875 
  3,068   9,737   
—
   12,805   4,496   3,640  －   8,136 
                
Liabilities                
Derivative financial instruments:                
- Derivative financial liabilities  305   2,445  －   2,750 
  305   2,445  －   2,750 

  December 31, 2016 
  Level 1  Level 2  Level 3  Total 
  RMB  RMB  RMB  RMB 
Assets            
Available-for-sale financial assets:            
- Listed  262  －   －   262 
Derivative financial instruments:               
- Derivative financial assets  29   733  －   762 
   291   733  －   1,024 
                 
Liabilities                
Derivative financial instruments:                
- Derivative financial liabilities  2,586   1,886  －   4,472 
   2,586   1,886  －   4,472 

F-66


Liabilities            
Derivative financial instruments:            
- Embedded derivative components of the convertible bonds 
—
   3,288   
—
   3,288 
- Other derivative financial liabilities  1,920   17,070   
—
   18,990 
   1,920   20,358   
—
   22,278 
During the years ended December 31, 20132015 and 2014,2016, there werewas no transfers between instruments in Level 1 and Level 2.

(ii)Fair values of financial instruments carried at other than fair value


F-63
The disclosures of the fair value estimates, and their methods and assumptions of the Group’s financial instruments, are made to comply with the requirements of IFRS 7 and IAS 39 and should be read in conjunction with the Group’s consolidated financial statements and related notes. The estimated fair value amounts have been determined by the Group using market information and valuation methodologies considered appropriate. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Group could realize in a current market exchange. The use of different market assumptions and / and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The fair values of the Group’s financial instruments carried at other than fair value (other than long-term indebtedness and investments in unquoted equity securities) approximate their carrying amounts due to the short-term maturity of these instruments. The fair values of long-term indebtedness are estimated by discounting future cash flows using current market interest rates offered to the Group that range between 0.37%1.08% to 7.03%4.90% and 0.33%1.06% to 6.15%4.90% for the years ended December 31, 20132015 and 2014,2016, respectively. The following table presents the carrying amount and fair value of the Group’s long-term indebtedness other than loans from Sinopec Group Company and fellow subsidiaries as of December 31, 20132015 and 2014:2016:

 December 31, 
 December 31,  2015  2016 
 2013  2014  RMB  RMB 
 RMB  RMB       
Carrying amount  151,852   115,767   105,927   110,969 
Fair value  149,694   112,362   103,482   109,308 

The Group has not developed an internal valuation model necessary to estimate the fair value of loans from Sinopec Group Company and fellow subsidiaries as it is not considered practicable to estimate their fair value because the cost of obtaining discount and borrowing rates for comparable borrowings would be excessive based on the Reorganization, the Group’s existing capital structure and the terms of the borrowings.

Investments in unquoted equity securities are individually and in aggregate not material to the Group’s financial condition or results of operations. There are no listed market prices for such interests in the PRC and, accordingly, a reasonable estimate of fair value could not be made without incurring excessive costs. The Group intends to hold these unquoted other investments in equity securities for long term purpose.

Except for the above items, the financial assets and liabilities of the Group are carried at amounts not materially different from their fair values as of December 31, 20132015 and 2014.2016.

36.35.ACCOUNTING ESTIMATES AND JUDGMENTS

The Group’s financial condition and results of operations are sensitive to accounting methods, assumptions and estimates that underlie the preparation of the consolidated financial statements. Management bases the assumptions and estimates on historical experience and on various other assumptions that it believes to be reasonable and which form the basis for making judgments about matters that are not readily apparent from other sources. On an on-going basis, management evaluates its estimates. Actual results may differ from those estimates as facts, circumstances and conditions change.

The selection of critical accounting policies, the judgments and other uncertainties affecting application of such policies and the sensitivity of reported results to changes in conditions and assumptions are factors to be considered when reviewing the consolidated financial statements. The significant accounting policies are set forth in Note 2. Management believes the following critical accounting policies involve the most significant judgments and estimates used in the preparation of the consolidated financial statements.


F-67
Oil and gas properties and reserves

The accounting for the exploration and production’s oil and gas activities is subject to accounting rules that are unique to the oil and gas industry. There are two methods to account for oil and gas business activities, the successful efforts method and the full cost method. The Group has elected to use the successful efforts method. The successful efforts method reflects the volatility that is inherent in exploring for mineral resources in that costs of unsuccessful exploratory efforts are charged to expense as they are incurred. These costs primarily

F-64
include dry hole costs, seismic costs and other exploratory costs. Under the full cost method, these costs are capitalized and written-off or depreciated over time.

Engineering estimates of the Group’s oil and gas reserves are inherently imprecise and represent only approximate amounts because of the subjective judgments involved in developing such information. There are authoritative guidelines regarding the engineering criteria that have to be met before estimated oil and gas reserves can be designated as “proved”. Proved and proved developed reserves estimates are updated at least annually and take into account recent production and technical information about each field. In addition, as prices and cost levels change from year to year, the estimate of proved and proved developed reserves also changes. This change is considered a change in estimate for accounting purposes and is reflected on a prospective basis in related depreciation rates. Oil and gas reserves have a direct impact on the assessment of the recoverability of the carrying amounts of oil and gas properties reported in the financial statements. If proved reserves estimates are revised downwards, earnings could be affected by changes in depreciation expense or an immediate write-down of the property’s carrying amount.

Future dismantlement costs for oil and gas properties are estimated with reference to engineering estimates after taking into consideration the anticipated method of dismantlement required in accordance with industry practices in similar geographic area, including estimation of economic life of oil and gas properties, technology and price level. The present values of these estimated future dismantlement costs are capitalized as oil and gas properties with equivalent amounts recognized as provision for dismantlement costs.

Despite the inherent imprecision in these engineering estimates, these estimates are used in determining depreciation expense, impairment loss and future dismantlement costs. Depreciation ratesCapitalized costs of proved oil and gas properties are determinedamortized on a unit-of-production method based on estimated proved developed reserve quantities (the denominator)volumes produced and capitalized costs of producing properties (the numerator). Producing properties’ capitalized costs are amortized based on the units of oil or gas produced.reserves.

Impairment for long livedlong-lived assets

If circumstances indicate that the net book value of a long-lived asset may not be recoverable, the asset may be considered “impaired”, and an impairment loss may be recognized in accordance with IAS 36 “Impairment of Assets”. The carrying amounts of long-lived assets are reviewed periodically in order to assess whether the recoverable amounts have declined below the carrying amounts. These assets are tested for impairment whenever events or changes in circumstances indicate that their recorded carrying amounts may not be recoverable. When such a decline has occurred, the carrying amount is reduced to recoverable amount. For goodwill, the recoverable amount is estimated annually. The recoverable amount is the greater of the net selling price and the value in use. It is difficult to precisely estimate selling price because quoted market prices for the Group’s assets or cash-generating units are not readily available. In determining the value in use, expected cash flows generated by the asset or the cash-generating unit are discounted to their present value, which requires significant judgment relating to level of sale volume, selling price and amount of operating costs. Management uses all readily available information in determining an amount that is a reasonable approximation of recoverable amount, including estimates based on reasonable and supportable assumptions and projections of sale volume, selling price and amount of operating costs.

Depreciation

Property, plant and equipment, other than oil and gas properties, are depreciated on a straight-line basis over the estimated useful lives of the assets, after taking into account the estimated residual value. Management reviews the estimated useful lives of the assets at least annually in order to determine the amount of depreciation expense to be recorded during any reporting period. The useful lives are based on the Group’s historical experience with similar assets and take into account anticipated technological changes. The depreciation expense for future periods is adjusted if there are significant changes from previous estimates.


F-68
Impairment for bad and doubtful debts

Management estimates impairment losses for bad and doubtful debts resulting from the inability of the Group’s customers to make the required payments. Management bases the estimates on the aging of the accounts receivable balance, customer credit-worthiness, and historical write-off experience. If the financial condition of the customers were to deteriorate, actual write-offs would be higher than estimated.


F-65
Allowance for diminution in value of inventories

If the costs of inventories become higher than their net realizable values, an allowance for diminution in value of inventories is recognized. Net realizable value represents the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale. Management bases the estimates on all available information, including the current market prices of the finished goods and raw materials, and historical operating costs. If the actual selling prices were to be lower or the costs of completion were to be higher than estimated, the actual allowance for diminution in value of inventories could be higher than estimated.
36.EVENTS AFTER THE BALANCE SHEET DATE

According to the purchase and sale agreement signed between SOIHL Hong Kong Holding Limited (“SOIHL HK”), a wholly owned subsidiary of the Group, and Chevron Global Energy Inc. (“CGEI”) on March 21, 2017, SOIHL HK is going to acquire the equity shares of and related interest in Chevron South Africa (Proprietary) Limited and the equity shares of Chevron Botswana (Proprietary) Limited (“the Targets”) held by CGEI, in a total consideration approximate to USD 900 million (“the Transaction”). The consideration is subject to adjustment according to the circumstances of the Targets, such as the changes in working capital, at completion. The Transaction has been approved by the Board of Directors of the Company, and is still subject to the governments' approval where the Targets operates. The Targets' principle activities are to manufacture and market refined oil products in South Africa and market refined oil products in Botswana.
37.PARENT AND ULTIMATE HOLDING COMPANY

The directors consider the parent and ultimate holding company of the Group as of December 31, 20142016 is Sinopec Group Company, a state-owned enterprise established in the PRC. This entity does not produce financial statements available for public use.

38.RESERVES

  2015  2016 
  RMB  RMB 
Capital reserve (Note (a))      
Balance as of December 31 of previous year  (30,497)  28,341 
Contribution from SAMC in the Acquisition of Gaoqiao Branch of SAMC (Note 1)  2,214  － 
Balance as of January 1  (28,283)  28,341 
Distribution to SAMC in the Acquisition of Gaoqiao Branch of SAMC (Note 1) －   (2,137)
Transaction with non-controlling interests  326   (30)
Contributions to subsidiaries from non-controlling interests  56,224  － 
Others  74   116 
Balance as of December 31  28,341   26,290 
         
Share premium (Note (b))        
Balance as of January 1  41,824   55,850 
Conversion of the 2011 Convertible Bonds (Note 38(g))  14,026  － 
Balance as of December 31  55,850   55,850 
         
Statutory surplus reserve (Note (c))        
Balance as of January 1  76,552   79,640 
Appropriation  3,088  － 
Balance as of December 31  79,640   79,640 
         
Discretionary surplus reserve        
Balance as of January 1  117,000   117,000 
Balance as of December 31  117,000   117,000 
         
Other reserves        
Balance as of January 1  (6,179)  (6,781)
Other comprehensive income  (1,169)  7,052 
Contributions to subsidiaries from non-controlling interests  446  － 
Others  121   153 
Balance as of December 31  (6,781)  424 
 

 
F-69F-66





Retained earnings (Note (d))      
Balance as of January 1  276,061   281,076 
Net income attributable to owners of the Company  32,512   46,672 
Final dividend inspect of the previous year, approved and paid during the year (Note (e))  (13,318)  (7,264)
Interim dividend (Note (f))  (10,896)  (9,565)
Appropriation  (3,088) － 
Profit distribution to SAMC (Note 1)  (74)  (47)
Others  (121)  (153)
Balance as of December 31  281,076   310,719 
   555,126   589,923 

Note:

(a)The capital reserve represents (i) the difference between the total amount of the par value of shares issued and the amount of the net assets transferred from Sinopec Group Company in connection with the Reorganization, and (ii) the difference between the considerations paid over the amount of the net assets of entities and related operations acquired from Sinopec Group Company and non-controlling interests.

(b)The application of the share premium account is governed by Sections 167 and 168 of the PRC Company Law.

(c)According to the Company’s Articles of Association, the Company is required to transfer 10% of its net income in accordance with the PRC accounting policies complying with Accounting Standards for Business Enterprises (“ASBE”),  adopted by the Group to statutory surplus reserve. In the event that the reserve balance reaches 50% of the registered capital, no transfer is needed. The transfer to this reserve must be made before distribution of a dividend to shareholders. Statutory surplus reserve can be used to make good previous years’ losses, if any, and may be converted into share capital by the issue of new shares to shareholders in proportion to their existing shareholdings or by increasing the par value of the shares currently held by them, provided that the balance after such issue is not less than 25% of the registered capital.

During the years ended December 31, 2014, 2015 and 2016, the Company transferred RMB 3,215, RMB 3,088 and RMB nil, respectively, being 10% of the net income determined in accordance with the PRC accounting policies complying with ASBE, to this reserve.

(d)As of December 31, 2015 and 2016, the amount of retained earnings available for distribution was RMB 175,679 and RMB 182,440, respectively, being the amount determined in accordance with the accounting policies complying with IFRS and ASBE, respectively. According to the Company’s Articles of Association, the amount of retained earnings available for distribution to owners of the Company is the lower of the amount determined in accordance with the accounting policies complying with ASBE and the amount determined in accordance with the accounting policies complying with IFRS.

Pursuant to a resolution passed at the director’s meeting on March 24, 2017, final dividends in respect of the year ended December 31, 2016 of RMB 0.17 per share totaling RMB 20,582 were proposed for shareholders’ approval at the Annual General Meeting. Final cash dividend for the year ended December 31, 2016 proposed after the balance sheet date has not been recognized as a liability at the balance sheet date.

(e)Pursuant to the shareholders’ approval at the Annual General Meeting on May 27, 2015, a final dividend of RMB 0.11 per share totaling RMB 13,318 according to total shares as of June 18, 2015 was approved. All dividends have been paid on June 19, 2015.

Pursuant to the shareholders’ approval at the Annual General Meeting on May 18, 2016, a final dividend of RMB 0.06 per share totaling RMB 7,264 according to total shares as of June 23, 2016 was approved. All dividends have been paid in the year ended December 31, 2016.


F-67
(f)Pursuant to the Company’s Articles of Association and a resolution passed at the Directors’ meeting on August 26, 2015, the directors authorized to declare the interim dividend for the year ended December 31, 2015 of RMB 0.09 per share totaling RMB 10,896. Dividends were paid on September 23, 2015.

Pursuant to the Company’s Articles of Association and a resolution passed at the Directors’ meeting on August 26, 2016, the directors authorized to declare the interim dividend for the year ended December 31, 2016 of RMB 0.079 per share totaling RMB 9,565. Dividends were paid on September 21, 2016.

(g)On March 1, 2011, the Company issued convertible bonds due in 2017 with an aggregate principal amount of RMB 23,000 in the PRC (the “2011 Convertible Bonds”). The 2011 Convertible Bonds were issued at par value of RMB 100 and bear a fixed interest rate of 0.5% per annum for the first year, 0.7% for the second year, 1.0% for the third year, 1.3% for the fourth year, 1.8% for the fifth year and 2.0% for the sixth year, payable annually. The holders can convert the 2011 Convertible Bonds into A shares of the Company from August 24, 2011 onwards at an initial conversion price of RMB 9.73 per share, subject to adjustment for, amongst other things, cash dividends, subdivision or consolidation of shares, bonus issues, issue of new shares, rights issues, capital distribution, change of control and other events which have an effect on the issued share capital of the Company (“the Conversion Option”). Unless previously redeemed, converted or purchased and cancelled, the 2011 Convertible Bonds will be redeemed within 5 trading days after maturity at 107% of the principal amount, including interest for the sixth year. The initial carrying amounts of the liability component and the derivative component, representing the Conversion Option of the 2011 Convertible Bonds, were RMB 19,279 and RMB 3,610, respectively.

During the term of the 2011 Convertible Bonds, the conversion price may be subject to downward adjustment that if the closing prices of the Company’s A Shares in any fifteen trading days out of any thirty consecutive trading days are lower than 80% of the prevailing conversion price, the board of directors may propose downward adjustment to the conversion price subject to the shareholders’ approval. The adjusted conversion price shall be not less than (a) the average trading price of the Company’s A Shares for the twenty trading days prior to the shareholders’ approval, (b) the average trading price of the Company’s A Shares on the day immediately before the shareholders’ approval, (c) the net asset value per share based on the latest audited financial statements prepared under ASBE, and (d) the nominal value per share.

During the term of the 2011 Convertible Bonds, if the closing price of the A Shares of the Company is not lower than 130% of the conversion price in at least fifteen trading days out of any thirty consecutive trading days, the Company has the right to redeem all or part of the 2011 Convertible Bonds based on the nominal value plus the accrued interest ("the terms of conditional redemption").

As of January 26, 2015, the terms of conditional redemption of 2011 Convertible Bonds of the Company have been triggered for the first time. At the 22nd meeting of the fifth session of the board of the Company (the “Board”), the Board has reviewed and approved the proposal for the redemption of 2011 Convertible Bonds, and decided to exercise the right of redemption and to redeem all of the outstanding 2011 Convertible Bonds registered on February 11, 2015.

From January 1, 2015 to February 11, 2015, the 2011 Convertible Bonds with a total nominal value of RMB 13,647 were converted into 2,790,814,006 A shares of the Company with a conversion price of 4.89 per share. As of February 11, 2015, the total share capital of the Company has been increased to 121,071,209,646 shares. The unconverted convertible bonds amounted to RMB 52.78 (527,760 convertible bonds). As at February 17, 2015, the Company has redeemed and fully paid the unconverted portion at RMB 101.261 per convertible bond (including the accrued interest and interest tax accrued thereon).

The changes in the fair value of the derivative component from December 31, 2014 to December 31, 2015 resulted in realized loss of RMB 259 which has been recorded in “finance costs” section of the consolidated statement of income.

The changes in the fair value of the derivative component from December 31, 2013 to December 31, 2014 resulted in realized loss of RMB 1,613 and an unrealized loss of RMB 2,997, which has been recorded in “finance costs” section of the consolidated statement of income.

During the year ended December 31, 2011, RMB 328 thousand of the 2011 Convertible Bonds were converted into 34,662 A shares of the Company.


F-68
During the year ended December 31, 2012, RMB 857,033 thousand of the 2011 Convertible Bonds were converted into 117,724,450 A shares of the Company.

During the year ended December 31, 2013, RMB 725 thousand of the 2011 Convertible Bonds were converted into 114,076 A shares of the Company.

During the year ended December 31, 2014, RMB 8,442 of the 2011 Convertible Bonds were converted into 1,715,081,853 A shares of the Company.

As of December 31, 2015, the 2011 Convertible bonds have been fully converted or redeemed.


F-69
CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING
ACTIVITIES (UNAUDITED)
(All currency amounts in millions)

In accordance with the Accounting Standards Update 2010-03, Extractive Activities – Oil and Gas (Topic 932): Oil and Gas Reserve Estimation and Disclosures, (“ASU 2010-03”), issued by the Financial Accounting Standards Board of the United States, this section provides supplemental information on oil and gas exploration and producing activities of the Group and its equity method investments as of December 31, 2012, 20132014, 2015 and 2014,2016, and for the years then ended in the following six separate tables. Tables I through III provide historical cost information under IFRS pertaining to capitalized costs related to oil and gas producing activities; costs incurred in oil and gas exploration and development; and results of operations related to oil and gas producing activities. Tables IV through VI present information on the Group’s and its equity method investments’ estimated net proved reserve quantities; standardized measure of discounted future net cash flows; and changes in the standardized measure of discounted cash flows.

Tables I to VI of supplemental information on oil and gas producing activities of the Group set out below represent information of the Company and its consolidated subsidiaries and equity method investments. The oil and gas producing activities of the equity method investee of the Group are relatively small and therefore the information is presented with total amount of both internal and external.

Table I:   Capitalized costs related to oil and gas producing activities

  Years ended December 31, 
  2014  2015  2016 
  RMB  RMB  RMB 
  Total  China  
Other
countries
  Total  China  
Other
countries
  Total  China  
Other
countries
 
                            
The Group                           
Property cost, wells and related equipments and facilities  569,172   533,137   36,035   613,134   572,446   40,688   650,686   606,493   44,193 
Supporting equipments and facilities  191,003   190,988   15   204,793   204,773   20   192,877   192,855   22 
Uncompleted wells, equipments and facilities  78,971   78,185   786   70,731   69,873   858   52,935   52,931   4 
Total capitalized costs  839,146   802,310   36,836   888,658   847,092   41,566   896,498   852,279   44,219 
Accumulated depreciation, depletion, amortization and impairment losses  (411,450)  (389,578)  (21,872)  (465,393)  (438,097)  (27,296)  (528,636)  (495,538)  (33,098)
Net capitalized costs  427,696   412,732   14,964   423,265   408,995   14,270   367,862   356,741   11,121 
Equity method investments                                    
Share of net capitalized costs of associates and joint ventures  15,277   —   15,277   11,296   —   11,296   9,337   —   9,337 
Total of the Group’s and its equity method investments’ results of net capitalized costs  442,973   412,732   30,241   
434,561
   408,995   
25,566
   377,199   356,741   20,458 
  Years ended December 31, 
  2012  2013  2014 
  RMB  RMB  RMB 
The Group         
Property cost, wells and related equipment and facilities  451,288   515,701   569,172 
Supporting equipment and facilities  158,749   176,883   191,003 
Uncompleted wells, equipment and facilities  57,124   64,569   78,971 
Total capitalized costs  667,161   757,153   839,146 
Accumulated depreciation, depletion, amortization and impairment losses  (316,445)  (361,859)  (411,450)
Net capitalized costs  350,716   395,294   427,696 
             
Equity method investments            
Share of net capitalized costs of joint ventures  —   14,528   15,277 
             
Table II:   Cost incurred in oil and gas exploration and development

  Years ended December 31, 
  2012  2013  2014 
  RMB  RMB  RMB 
The Group         
Exploration  22,637   19,158   16,704 
Development  71,168   81,969   73,923 
Total costs incurred  93,805   101,127   90,627 
             
Equity method investments            
Share of costs of exploration and development of joint ventures  —   35   1,381 
             

F-70
CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING
ACTIVITIES (UNAUDITED) – (Continued)
(All currency amounts in millions)


Table II:   Costs incurred in oil and gas exploration and development
  Years ended December 31, 
  2014  2015  2016 
  RMB  RMB  RMB 
  Total  China  
Other
countries
  Total  China  
Other
countries
  Total  China  
Other
countries
 
                            
The Group                           
Exploration  16,704   16,704   —   11,572   11,572   —   10,942   10,942   — 
Development  73,923   71,468   2,455   52,229   49,605   2,624   32,280   31,918   362 
Total costs incurred  90,627   88,172   2,455   63,801   61,177   2,624   43,222   42,860   362 
Equity method investments                                    
Share of costs of exploration and development of associates and joint ventures  1,381   —   1,381   1,218   —   1,218   719   —   719 
Total of the Group’s and its equity method investments’ results of exploration and development costs  92,008   88,172   3,836   65,019   61,177   3,842   43,941   42,860   1,081 


F-71
CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING
ACTIVITIES (UNAUDITED)
(All currency amounts in millions)


Table III:   Results of operations related to oil and gas producing activities

  Years ended December 31, 
  2014  2015  2016 
  RMB  RMB  RMB 
  Total  China  Other countries  Total  China  Other countries  Total  China  
Other
countries
 
                            
The Group                           
Revenues                           
Sales  69,223   69,223   —   52,580   52,580   —   36,720   36,720   — 
Transfers  141,521   132,920   8,601   70,453   63,900   6,553   58,571   54,555   4,016 
   210,744   202,143   8,601   123,033   116,480   6,553   95,291   91,275   4,016 
Production costs excluding taxes  (50,567)  (48,962)  (1,605)  (48,315)  (46,883)  (1,432)  (44,077)  (42,652)  (1,425)
Exploration expenses  (10,969)  (10,969)  —   (10,459)  (10,459)  —   (11,035)  (11,035)  — 
Depreciation, depletion, amortization and impairment losses  (51,338)  (48,665)  (2,673)  (56,293)  (52,216)  (4,077)  (73,534)  (68,594)  (4,940)
Taxes other than income tax  (31,995)  (31,995)  —   (6,083)  (6,083)  —   (4,576)  (4,576)  — 
Earnings before taxation  65,875   61,552   4,323   1,883   839   1,044   (37,931)  (35,582)  (2,349)
Income tax expense  (17,454)  (15,387)  (2,067)  (1,205)  (210)  (995)  (798)  —   (798)
Results of operation from producing activities  48,421   46,165   2,256   678   629   49   (38,729)  (35,582)  (3,147)
Equity method investments                                    
Revenues                                    
Sales  12,973   —   12,973   7,207   —   7,207   6,352   —   6,352 
   12,973   —   12,973   7,207   —   7,207   6,352   —   6,352 
Production costs excluding taxes  (1,371)  —   (1,371)  (1,165)  —   (1,165)  (2,205)  —   (2,205)
Exploration expenses  (10)  —   (10)  (4)  —   (4)  —   —   — 
Depreciation, depletion, amortization and impairment losses  (2,961)  —   (2,961)  (2,157)  —   (2,157)  (2,752)  —   (2,752)
Taxes other than income tax  (6,881)  —   (6,881)  (3,036)  —   (3,036)  (2,570)  —   (2,570)
Earnings before taxation  1,750   —   1,750   845   —   845   (1,175)  —   (1,175)
Income tax expense  (958)  —   (958)  (418)  —   (418)  (195)  —   (195)
Share of net income for producing activities of associates and joint ventures  792   —   792   427   —   427   (1,370)  —   (1,370)
Total of the Group’s and its equity method investments’ results of operations for producing activities  49,213   46,165   3,048   1,105   629   476   (40,099)  (35,582)  (4,517)
  Years ended December 31, 
  2012  2013  2014 
  RMB  RMB  RMB 
The Group         
Revenues         
Sales  53,270   60,616   69,223 
Transfers  174,251   158,317   141,521 
   227,521   218,933   210,744 
Production costs excluding taxes  (47,467)  (52,163)  (50,567)
Exploration expenses  (15,533)  (12,573)  (10,969)
Depreciation, depletion, amortization and impairment losses  (40,289)  (46,649)  (51,338)
Taxes other than income tax  (39,784)  (35,391)  (31,995)
Earnings before taxation  84,448   72,157   65,875 
Income tax expense  (22,953)  (20,113)  (17,454)
Results of operation from producing activities  61,495   52,044   48,421 
             
Equity method investments            
Share of net income for producing activities of joint ventures  —   40   792 
             
Total of the Group and equity method investments results of operations for producing activities  61,495   52,084   49,213 
             

The results of operations for producing activities for the years ended December 31, 2012, 20132014, 2015 and 20142016 are shown above. Revenues include sales to unaffiliated parties and transfers (essentially at third-party sales prices) to other segments of the Group. All revenues reported in this table do not include royalties to others as there were none. Income taxes are based on statutory tax rates, reflecting allowable deductions and tax credits. General corporate overhead and interest income and expense are excluded from the results of operations.


F-72
CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING
ACTIVITIES (UNAUDITED)
(All currency amounts in millions)


Table IV:   Reserve quantities information

The Group’s and its equity method investments’ estimated net proved underground oil and gas reserves and changes thereto for the years ended December 31, 2012, 20132014, 2015 and 20142016 are shown in the following table.

Proved oil and gas reserves are those quantities of oil and gas, which by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulation before the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether the estimate is a deterministic estimate or probabilistic estimate. Due to the inherent uncertainties and the limited nature of reservoir data, estimates of underground reserves are subject to change as additional information becomes available.

Proved developed oil and gas reserves are proved reserves that can be expected to be recovered through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared with the cost of a new well.


F-71
CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING
ACTIVITIES (UNAUDITED) – (Continued)
(All currency amounts in millions)

 “Net”“Net” reserves exclude royalties and interests owned by others and reflect contractual arrangements and obligation of rental fee in effect at the time of the estimate.

F-73
  Years ended December 31, 
  2012  2013  2014 
The Group         
Proved developed and undeveloped reserves (oil) (million barrels)         
Beginning of year  2,848   2,843   2,841 
Revisions of previous estimates  9   (10)  (38)
Improved recovery  163   166   154 
Extensions and discoveries  151   175   141 
Production  (328)  (333)  (326)
End of year  2,843   2,841   2,772 
             
Non-controlling interest in proved developed and undeveloped reserves at the end of year  32   31   32 
Proved developed reserves            
Beginning of year  2,545   2,577   2,562 
End of year  2,577   2,562   2,529 
Proved undeveloped reserves            
Beginning of year  303   266   279 
End of year  266   279   243 
             
Proved developed and undeveloped reserves (gas) (billion cubic feet)            
Beginning of year  6,709   6,730   6,493 
Revisions of previous estimates  278   (326)  175 
Improved recovery  109   35   48 
Extensions and discoveries  232   714   711 
Production  (598)  (660)  (712)
End of year  6,730   6,493   6,715 
Proved developed reserves            
Beginning of year  4,246   5,439   5,781 
End of year  5,439   5,781   5,987 
Proved undeveloped reserves            
Beginning of year  2,463   1,291   712 
End of year  1,291   712   728 
Share of proved developed and undeveloped reserves of joint ventures (oil) (million barrels)            
Beginning of year  —   —   289 
End of year  —   289   275 
Share of proved developed and undeveloped reserves of joint ventures (gas) (billion cubic feet)            
Beginning of year  —   —   27 
End of year
  —   27   26 
The Group and share of joint ventures            
Proved developed and undeveloped reserves (oil) (million barrels)            
Beginning of year  2,848   2,843   3,130 
End of year  2,843   3,130   3,047 
Proved developed and undeveloped reserves (gas) (billion cubic feet)            
Beginning of year  6,709   6,730   6,520 
End of year  6,730   6,520   6,741 


F-72

CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING
ACTIVITIES (UNAUDITED) – (Continued)
(All currency amounts in millions)


  Years ended December 31, 
  2014  2015  2016 
  RMB  RMB  RMB 
  Total  China  
Other
countries
  Total  China  
Other
countries
  Total  China  
Other
countries
 
                            
The Group                           
Proved developed and undeveloped reserves (oil) (million barrels)                           
Beginning of year  2,841   2,773   68   2,772   2,700   72   1,957   1,902   55 
Revisions of previous estimates  (38)  (46)  8   (638)  (641)  3   (505)  (509)  4 
Improved recovery  154   154   —   99   99   —   35   35   — 
Extensions and discoveries  141   130   11   41   41   —   41   41   — 
Production  (326)  (311)  (15)  (317)  (297)  (20)  (272)  (253)  (19)
End of year  2,772   2,700   72   1,957   1,902   55   1,256   1,216   40 
Non-controlling interest in proved developed and undeveloped reserves at the end of year  32   —   32   25   —   25   18   —   18 
Proved developed reserves                                    
Beginning of year  2,562   2,501   61   2,529   2,465   64   1,753   1,701   52 
End of year  2,529   2,465   64   1,753   1,701   52   1,120   1,080   40 
Proved undeveloped reserves                                    
Beginning of year  279   272   7   243   235   8   204   201   3 
End of year  243   235   8   204   201   3   136   136   — 
Proved developed and undeveloped reserves (gas) (billion cubic feet)                                    
Beginning of year  6,493   6,493   —   6,715   6,715   —   7,551   7,551   — 
Revisions of previous estimates  175   175   —   (252)  (252)  —   (170)  (170)  — 
Improved recovery  48   48   —   70   70   —   66   66   — 
Extensions and discoveries  711   711   —   1,749   1,749   —   475   475   — 
Production  (712)  (712)  —   (731)  (731)  —   (762)  (762)  — 
End of year  6,715   6,715   —   7,551   7,551   —   7,160   7,160   — 
Proved developed reserves                                    
Beginning of year  5,781   5,781   —   5,987   5,987   —   6,439   6,439   — 
End of year  5,987   5,987   —   6,439  ��6,439   —   6,436   6,436   — 
Proved undeveloped reserves                                    
Beginning of year  712   712   —   728   728   —   1,112   1,112   — 
End of year  728   728   —   1,112   1,112   —   724   724   — 



F-74
CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING
ACTIVITIES (UNAUDITED)
(All currency amounts in millions)


  Years ended December 31, 
  2014  2015  2016 
  RMB  RMB  RMB 
  Total  China  
Other
countries
  Total  China  
Other
countries
  Total  China  
Other
countries
 
Equity method investments                           
Proved developed and undeveloped reserves of associates and joint ventures (oil) (million barrels)                           
Beginning of year  289   —   289   275   —   275   286   —   286 
Revisions of previous estimates  16   —   16   34   —   34   (2)  —   (2)
Improved recovery  —   —   —   1   —   1   3   —   3 
Extensions and discoveries  2   —   2   9   —   9   41   —   41 
Production  (32)  —   (32)  (33)  —   (33)  (32)  —   (32)
End of year  275   —   275   286   —   286   296   —   296 
Proved developed reserves                                    
Beginning of year  259   —   259   252   —   252   260   —   260 
End of year  252   —   252   260   —   260   273   —   273 
Proved undeveloped reserves                                    
Beginning of year  30   —   30   23   —   23   26   —   26 
End of year  23   —   23   26   —   26   23   —   23 
Proved developed and undeveloped reserves of associates and joint ventures (gas) (billion cubic feet)                                    
Beginning of year  27   —   27   26   —   26   19   —   19 
Revisions of previous estimates  4   —   4   (3)  —   (3)  3   —   3 
Improved recovery  —   —   —   —   —   —   —   —   — 
Extensions and discoveries  —   —   —   —   —   —   —   —   — 
Production  (5)  —   (5)  (4)  —   (4)  (4)  —   (4)
End of year  26   —   26   19   —   19   18   —   18 
Proved developed reserves                                    
Beginning of year  24   —   24   24   —   24   18   —   18 
End of year  24   —   24   18   —   18   18   —   18 
Proved undeveloped reserves                                    
Beginning of year  3   —   3   2   —   2   1   —   1 
End of year  2   —   2   1   —   1   —   —   — 


F-75
CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING
ACTIVITIES (UNAUDITED)
(All currency amounts in millions)



  Years ended December 31, 
  2014  2015  2016 
  RMB  RMB  RMB 
  Total  China  Other countries  Total  China  
Other
countries
  Total  China  
Other
countries
 
Total of the Group and its equity method investments                           
Proved developed and undeveloped reserves (oil) (million barrels)                           
Beginning of year  3,130   2,773   357   3,047   2,700   347   2,243   1,902   341 
End of year  3,047   2,700   347   2,243   1,902   341   1,552   1,216   336 
Proved developed and undeveloped reserves (gas) (billion cubic feet)                                    
Beginning of year  6,520   6,493   27   6,741   6,715   26   7,570   7,551   19 
End of year  6,741   6,715   26   7,570   7,551   19   7,178   7,160   18 


Table V: Standardized measure of discounted future net cash flows

The standardized measure of discounted future net cash flows, related to the above proved oil and gas reserves, is calculated in accordance with the requirements of ASU 2010-03. Estimated future cash inflows from production are computed by applying the average, first-day-of-the-month price for oil and gas during the twelve-month period before the ending date of the period covered by the report to year-end quantities of estimated net proved reserves. Future price changes are limited to those provided by contractual arrangements in existence at the end of each reporting year. Future development and production costs are those estimated future expenditures necessary to develop and produce year-end estimated proved reserves based on year-end cost indices, assuming continuation of year-end economic conditions. Estimated future income taxes are calculated by applying appropriate year-end statutory tax rates to estimated future pre-tax net cash flows, less the tax basis of related assets. Discounted future net cash flows are calculated using 10% midperiod discount factors. This discounting requires a year-by-year estimate of when the future expenditure will be incurred and when the reserves will be produced.

The information provided does not represent management’s estimate of the Group’s and its equity method investments’ expected future cash flows or value of proved oil and gas reserves. Estimates of proved reserve quantities are imprecise and change over time as new information becomes available. Moreover, probable and possible reserves, which may become proved in the future, are excluded from the calculations. The arbitrary valuation requires assumptions as to the timing and amount of future development and production costs. The calculations are made for the years ended December 31, 2012, 20132014, 2015 and 20142016 and should not be relied upon as an indication of the Group’s and its equity method investments’ future cash flows or value of its oil and gas reserves.

  Years ended December 31, 
  2012  2013  2014 
  RMB  RMB  RMB 
          
The Group         
Future cash flows  2,029,836   1,894,416   1,807,330 
Future production costs  (965,683)  (902,692)  (823,575)
Future development costs  (50,162)  (46,784)  (46,684)
Future income tax expenses  (176,591)  (145,198)  (135,219)
Undiscounted future net cash flows  837,400   799,742   801,852 
10% annual discount for estimated timing of cash flows  (322,234)  (288,341)  (288,393)
Standardized measure of discounted future net cash flows  515,166   511,401   513,459 
Discounted future net cash flows attributable to non-controlling interests  7,059   5,149   4,815 
Equity method investments            
Standardized measure of discounted future net cash flows —   23,261   19,650 

F-76
CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING
ACTIVITIES (UNAUDITED)
(All currency amounts in millions)



  Years ended December 31, 
  2014  2015  2016 
  RMB  RMB  RMB 
  Total  China  Other countries (i)  Total  China  Other countries  Total  China  Other countries 
The Group                           
Future cash flows  1,807,330   1,763,757   43,573   931,637   912,898   18,739   603,785   592,389   11,396 
Future production costs  (823,575)  (811,267)  (12,308)  (440,079)  (430,695)  (9,384)  (271,650)  (266,549)  (5,101)
Future development costs  (46,684)  (38,442)  (8,242)  (38,669)  (34,092)  (4,577)  (20,241)  (15,615)  (4,626)
Future income tax expenses  (135,219)  (125,329)  (9,890)  (11,139)  (9,779)  (1,360)  (1,405)  —   (1,405)
Undiscounted future net cash flows  801,852   788,719   13,133   441,750   438,332   3,418   310,489   310,225   264 
10% annual discount for estimated timing of cash flows  (288,393)  (283,670)  (4,723)  (152,031)  (150,855)  (1,176)  (102,342)  (102,332)  (10)
Standardized measure of discounted future net cash flows  513,459   505,049   8,410   289,719   287,477   2,242   208,147   207,893   254 
Discounted future net cash flows attributable to non–controlling interests  4,815   —   4,815   1,356   —   1,356   114   —   114 
Equity method investments                                    
Future cash flows  77,593   —   77,593   41,013   —   41,013   35,690   —   35,690 
Future production costs  (14,393)  —   (14,393)  (11,665)  —   (11,665)  (10,783)  —   (10,783)
Future development costs  (13,313)  —   (13,313)  (2,996)  —   (2,996)  (3,444)  —   (3,444)
Future income tax expenses  (8,530)  —   (8,530)  (4,159)  —   (4,159)  (3,303)  —   (3,303)
Undiscounted future net cash flows  41,357   —   41,357   22,193   —   22,193   18,160   —   18,160 
10% annual discount for estimated timing of cash flows  (21,707)  —   (21,707)  (9,828)  —   (9,828)  (7,969)  —   (7,969)
Standardized measure of discounted future net cash flows  19,650   —   19,650   12,365   —   12,365   10,191   —   10,191 
Total of the Group’s and its equity method investments’ results of standardized measure of discounted future net cash flows  533,109   505,049   28,060   302,084   287,477   14,607   218,338   207,893   10,445 


F-77
CHINA PETROLEUM & CHEMICAL CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING
ACTIVITIES (UNAUDITED)
(All currency amounts in millions)


Table VI:   Changes in the standardized measure of discounted cash flows

  Years ended December 31, 
  2012  2013  2014 
  RMB  RMB  RMB 
          
Sales and transfers of oil and gas produced, net of production costs  (104,319)  (131,379)  (128,182)
Net changes in prices and production costs  (28,277)  (33,245)  (25,427)
Net change due to extensions, discoveries and improved recoveries  73,394   75,336   68,147 
Revisions of previous quantity estimates  12,945   (10,478)  (1,453)
Previously estimated development costs incurred during the year  19,526   17,831   22,286 
Accretion of discount  40,767   62,380   60,425 
Net change in income taxes  4,630   15,790   6,262 
Others  261  
—
  
—
 
Net change for the year  18,927   (3,765)  2,058 
             
F-73
  Years ended December 31, 
  2014  2015  2016 
  RMB  RMB  RMB 
The Group         
Sales and transfers of oil and gas produced, net of production costs  (128,182)  (68,635)  (46,637)
Net changes in prices and production costs  (11,220)  (281,975)  (53,715)
Net changes in estimated future development cost  (14,207)  (6,873)  6,073 
Net changes due to extensions, discoveries and improved recoveries  68,147   44,838   15,113 
Revisions of previous quantity estimates  (1,453)  (68,875)  (48,479)
Previously estimated development costs incurred during the year  22,286   18,494   9,370 
Accretion of discount  60,425   60,005   30,340 
Net changes in income taxes  6,262   79,281   6,363 
Net changes for the year  2,058   (223,740)  (81,572)
Equity method investments            
Sales and transfers of oil and gas produced, net of production costs  (4,721)  (3,006)  (1,577)
Net changes in prices and production costs  (4,573)  (12,987)  (3,952)
Net changes in estimated future development cost  (431)  997   (534)
Net changes due to extensions, discoveries and improved recoveries  404   611   1,887 
Revisions of previous quantity estimates  978   1,520   (92)
Previously estimated development costs incurred during the year  1,343   1,163   322 
Accretion of discount  2,746   2,681   1,308 
Net changes in income taxes  643   1,736   464 
Net changes for the year  (3,611)  (7,285)  (2,174)
Total of the Group’s and its equity method investments’ results of net changes for the year  (1,553)  (231,025)  (83,746)
 
F-78